amp Airline Productivity US Airways Seungwon Noh Apr 09 2012 US Airways is a NLC LCCs Characteristics US Airways Single Aircraft type or Single family of aircraft Changing ID: 354839
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Slide1
Airline Operating Costs & Airline Productivity
- US Airways -
Seungwon
Noh
(Apr. 09. 2012)Slide2
US Airways is a NLC.
LCC’s Characteristics
US Airways
Single Aircraft type or Single family of aircraft Changing fleets to AirbusPoint-to-point ticketing,no connecting hubsX Operate 3 hubs (Charlotte, Philadelphia, Phoenix) and 1 focus city (Washington D.C.)No labor unions, Lower wage rates Low wage ratesSingle cabin service, no premium classX Provide different class seatsNo seat assignmentsX Assign seatsReduced frills for on-board service No free mealsNo frequent-flyer loyalty programX Have mileage programAvoid global distribution systemsX Use GDS
US Airways was a Network Legacy Carrier from the beginning.
Try to be a LCC, but have other factors to incur cost a lot.
US Airways has strong hub & spoke network.
US Airways Express operates spoke network with contract.Slide3
Terminology and Definition
RPMs (Revenue Passenger Miles)
Number of passenger-miles transported ASMs (Available Seat Miles) Number of seat-miles transported RASM (Revenue per ASM) Revenue received for each available seat mile Total Revenue / ASMsSlide4
Terminology and Definition
CASM (Cost
per ASM)
Cost to operate each available seat mile Total Operating Cost / ASMsYield Average fare paid by passenger per mile flown Total Revenue / RPMsPRASM (Passenger RASM) Passenger revenue received for each available seat mile Passenger Revenue / ASMsSlide5
Terminology and Definition
Fuel consumed
Number of gallons of fuel consumedFuel Costs per ASM Fuel cost to operate each available seat mile Total Fuel Cost / ASMsNon-Fuel Costs per ASM Non-fuel cost to operate each available seat mile (Total Operating Cost – Fuel Cost) / ASMsSlide6
(Millions)
Airline Analysis
Similar trend in ASM and RPM
Decrease in 2001 (due to Sep. 11) Significant changes in 2005 (Bankruptcy and Merge with America West) L/F increased with seasonal fluctuationSlide7
(Millions)
Airline Analysis
Changes by the merging in revenue and expense trend
Increase after decrease Significant decrease of revenue in 2001 (Sep. 11) Remarkable increase of expense in 2008 (Fuel price) Loss followed by profit after the mergingSlide8
(Cents)
Airline Analysis
Similar trends with total revenue and expense
Increase after decrease Decrease of RASM, Yield, PRASM in 2001 (Sep. 11) Big increase of CASM in 2008 (Fuel price) Increase in profitability after mergingSlide9
(Millions)
(Gallons in Million)
Airline Analysis
Expenditure on fuel increase Significant increase in 2005 (merging) and 2008 (increase of fuel price) Big difference by the merging in fuel consumption Consume fuel 3 times more than before mergingSlide10
Airline Analysis
(Cents)
(Per Gallon)
Significant increase of jet fuel price Reached at $3.50 per gallon in 2008 Gradual increase in fuel expense per ASM Decrease of non-fuel expenseSlide11
Effects of Fuel Prices
Airline Expenses
Proportion of fuel expense to total expense highly depends on fuel price.
As fuel price increases, total operating expenses increases. Airline Finance The higher fuel price, the worse airline finance. Airline Network Structure No direct effects of fuel priceCoefficientt-staticsSignificant LevelAdjusted R2Constant.0484.207.0000.898Fuel Price.11417.058.000Slide12
Summary
US Airways is considered a NLC.
Strong Hub & Spoke Network, High Operating Cost
US Airways experienced three big changes of Operating Cost and Productivity between 2001 and 2009. Traffic, Output and Revenue decreased in 2001 due to Sep. 11. Most significant decrease and increase of all data in 2005 (Bankrupt and Merge with America West) Big jump of Fuel prices in 2008 Fuel Prices affect the airline’s operating expenses and finance significantly.