7 ms·

Not quite. The extra seats only provide additional revenue when the flights would have otherwise been full. From the article, the average flight is only 80% ful

Not quite. The extra seats only provide additional revenue when the flights would have otherwise been full. From the article, the average flight is only 80% full, which means those six extra seats aren't providing any additional revenue. To determine the actual revenue increase from those six extra seats, we would have to know how frequently flights have less than 6 empty seats.

deleted 13y ago
[deleted]
- rgbrenner 13y ago
  " (4.8 * $141.72 * 93,350 = $63,689,399) in additional revenue." x 12, since the number of flights is a monthly number.. which gives you (roughly) the same number in the article.
  - peter_l_downs 13y ago
    Ah, I'm dumb.
    - rgbrenner 13y ago
      Missing a detail doesn't make you dumb... I do it all the time. Too many examples to list here
endtwist 13y ago
While these numbers will never be perfect, per se, RITA[1] shows that in 2011, Southwest's loadfactor was 80.8% while in 2012, loadfactor was 80.4%. So, the flights remained around 80% full on average. I took this into account in my calculation and assumed roughly 4.8 more seats were filled on average per flight, not a full 6. [1] http://www.transtats.bts.gov/carriers.asp?pn=1 http://www.transtats.bts.gov/carriers.asp?pn=1
- jdoliner 13y ago
  I think the key question then is why it was that 4.8 more seats were filled on average per flight. If we had data the showed that the distribution of plane occupancy were the same year over year save for a few occasions where last year the plane had been at capacity but this year those extra 6 seats had been put to use then the conclusion could be valid. However with the data I've seen so far it seems spurious to conclude that the extra 4.8 filled seats were caused by the extra 6 physical seats.
  - lancedouglas 13y ago
    Since not all seats are sold for an equal price, the extra seats may have indeed increased revenue potential by allowing for more "premium location" seats on the plane. There are a lot of factors and it would be silly to think that the airline didn't take more than we can come up with into account in their decision.
  - jcampbell1 13y ago
    Assume the pricing for seats is as follows: $100 for first 50% of capacity $120 for next 20% $170 for next 20% $300 for next 5% $600 for final 5% What is the revenue impact of expanding capacity? The solution is not obvious, but the author's approximation is more accuare than you suggest. You obviously can't solve this without a stochastic ticket demand model, but 4.8 is much closer to the right answer than 0.
    - josefresco 13y ago
      Also if the airline wants to maintain an 80% capacity, having an extra x% of seats means they add to revenue if they can maintain that occupancy percentage. In this case we don't even need to factor in 100% occupancy, which if anything would help the numbers as I'm sure last seats on a fully booked flight aren't cheap.
      - wtvanhest 13y ago
        They target around 100% full. That being said, having more seats allows them to adjust their pricing model so that they have more seats to attempt to maximize revenue. Depending on the demand structure of routes, those 6 seats may have wildly different values and could potentially be worth more than the average ticket price, on average for the airline. Since this is counter-intuitive, I'll explain why briefly: Airlines attempt to price discriminate by selling low priced tickets to leisure travelers and high priced tickets to business customers. The problem airlines face is that business travelers book at the last minute. Since business travelers book at the last minute, they need to estimate the number of business travelers who will be flying. If the average leisure passenger ticket sells for $100, and the average business ticket sells for $500, just having 1 extra seat can add 5 leisure tickets worth of revenue assuming they sell the same number of leisure tickets. Realistically, their model will readjust the optimal pricing changes overtime to capture the most value. Because the additional seats give the model more flexibility, I would not be surprised if the additional seats added more than an average of 80% of 6 seats multiplied by the average ticket price.
kamkazemoose 13y ago
You also need to calculate the extra fuel costs for the additional weight of the empty seats. If most of the time those seats are empty, they need to be utilized enough to justify their extra expense.
- ohazi 13y ago
  But we're looking at revenue, not profit. None of the expenses have been considered yet.
JulianMorrison 13y ago
Plane seats are over-committed on an informed guess of how many people will cancel, with enough slack built in as to mostly prevent the embarrassing case "I bought a ticket and there's no seat on the plane". So six extra seats may well equal seven extra tickets allocated for sale each time. Of course the bastards should still be tortured for reducing the leg room.
smoyer 13y ago
People don't like booking the last seat on a jam-packed flight. If given the preference, they'll find a flight with some room (this applies in other cases where people decide whether or not to be in a crowd). So I wouldn't be surprised at all to hear that Southwest's 80% capacity remained constant before and after the six additional seats were added. EDIT: Here's a related article where church seating on pews versus individual chairs is discussed - and airplane seats are even mentioned: http://www.alban.org/conversation.aspx?id=2380 http://www.alban.org/conversation.aspx?id=2380

deleted 13y ago

[deleted]

rgbrenner 13y ago
" (4.8 * $141.72 * 93,350 = $63,689,399) in additional revenue." x 12, since the number of flights is a monthly number.. which gives you (roughly) the same number in the article.
- peter_l_downs 13y ago
  Ah, I'm dumb.
  - rgbrenner 13y ago
    Missing a detail doesn't make you dumb... I do it all the time. Too many examples to list here

endtwist 13y ago

While these numbers will never be perfect, per se, RITA[1] shows that in 2011, Southwest's loadfactor was 80.8% while in 2012, loadfactor was 80.4%. So, the flights remained around 80% full on average. I took this into account in my calculation and assumed roughly 4.8 more seats were filled on average per flight, not a full 6. [1] http://www.transtats.bts.gov/carriers.asp?pn=1 http://www.transtats.bts.gov/carriers.asp?pn=1

jdoliner 13y ago
I think the key question then is why it was that 4.8 more seats were filled on average per flight. If we had data the showed that the distribution of plane occupancy were the same year over year save for a few occasions where last year the plane had been at capacity but this year those extra 6 seats had been put to use then the conclusion could be valid. However with the data I've seen so far it seems spurious to conclude that the extra 4.8 filled seats were caused by the extra 6 physical seats.
- lancedouglas 13y ago
  Since not all seats are sold for an equal price, the extra seats may have indeed increased revenue potential by allowing for more "premium location" seats on the plane. There are a lot of factors and it would be silly to think that the airline didn't take more than we can come up with into account in their decision.
- jcampbell1 13y ago
  Assume the pricing for seats is as follows: $100 for first 50% of capacity $120 for next 20% $170 for next 20% $300 for next 5% $600 for final 5% What is the revenue impact of expanding capacity? The solution is not obvious, but the author's approximation is more accuare than you suggest. You obviously can't solve this without a stochastic ticket demand model, but 4.8 is much closer to the right answer than 0.
  - josefresco 13y ago
    Also if the airline wants to maintain an 80% capacity, having an extra x% of seats means they add to revenue if they can maintain that occupancy percentage. In this case we don't even need to factor in 100% occupancy, which if anything would help the numbers as I'm sure last seats on a fully booked flight aren't cheap.
    - wtvanhest 13y ago
      They target around 100% full. That being said, having more seats allows them to adjust their pricing model so that they have more seats to attempt to maximize revenue. Depending on the demand structure of routes, those 6 seats may have wildly different values and could potentially be worth more than the average ticket price, on average for the airline. Since this is counter-intuitive, I'll explain why briefly: Airlines attempt to price discriminate by selling low priced tickets to leisure travelers and high priced tickets to business customers. The problem airlines face is that business travelers book at the last minute. Since business travelers book at the last minute, they need to estimate the number of business travelers who will be flying. If the average leisure passenger ticket sells for $100, and the average business ticket sells for $500, just having 1 extra seat can add 5 leisure tickets worth of revenue assuming they sell the same number of leisure tickets. Realistically, their model will readjust the optimal pricing changes overtime to capture the most value. Because the additional seats give the model more flexibility, I would not be surprised if the additional seats added more than an average of 80% of 6 seats multiplied by the average ticket price.

kamkazemoose 13y ago

You also need to calculate the extra fuel costs for the additional weight of the empty seats. If most of the time those seats are empty, they need to be utilized enough to justify their extra expense.

ohazi 13y ago
But we're looking at revenue, not profit. None of the expenses have been considered yet.

JulianMorrison 13y ago

Plane seats are over-committed on an informed guess of how many people will cancel, with enough slack built in as to mostly prevent the embarrassing case "I bought a ticket and there's no seat on the plane". So six extra seats may well equal seven extra tickets allocated for sale each time. Of course the bastards should still be tortured for reducing the leg room.

smoyer 13y ago

People don't like booking the last seat on a jam-packed flight. If given the preference, they'll find a flight with some room (this applies in other cases where people decide whether or not to be in a crowd). So I wouldn't be surprised at all to hear that Southwest's 80% capacity remained constant before and after the six additional seats were added. EDIT: Here's a related article where church seating on pews versus individual chairs is discussed - and airplane seats are even mentioned: http://www.alban.org/conversation.aspx?id=2380 http://www.alban.org/conversation.aspx?id=2380