Give them an inch and they take $773 million • Hacker News Board

Re: Give them an inch and they take $773 million

#21

Post by tiredofcareer » Wed, May 15, 2013, 5:52 AM UTC

patio11 wrote: post #8

verroq wrote: post #2

>implying the flights stayed 80% full after new seats were added >implying decreased customer satisfaction didn't hurt their revenue >implying their systems didn't need to scale because of increased customers >implying their R&D on smaller legroom didn't cost anything >implying upgrading planes didn't cost anything >implying more customers on planes didn't have an impact on maintenance costs >implying revenue means a…

The prevailing theory among air carriers is that demand for flights is totally exogenous to the industry and allocation of flights between carriers in the industry is, for most customers (e.g. not frequent business travelers, who are price insensitive and care about mileage), dependent pretty much solely on price. Accordingly, minor decreases in comfort which add capacity are pretty much an auto-win. Many people disl…

For most customers, maybe, but I suspect there's a pretty sizable portion of the population (myself included) that will happily pay more for an airline that treats me extraordinarily well, considers my comfort while on board, and gives me reasons to shout their name down the street. For example, Virgin America is one of those airlines for me, and I will happily pay a premium to fly one of their tragically few routes (they're one of the few airlines I fly first on, as well). I blacklist Southwest entirely because of the complete disregard for my experience shown on the three miserable flights I've had with them. I don't think I fit in your business bucket, but that's a data point, at least.

In another industry where profit is the focus, domain registration, I'm absolutely dying for a $100-$200/year registrar that knows what they're doing and isn't awful to deal with. I will happily pay that premium since my hosting bill far outweighs my domain registration, and handling support tickets expediently and providing features I want are far more important than the bottom line to me. If an extra $10/year from all customers means I get IPv6 glue or a ticket answered inside of 72 hours, please, do it! (This is less relevant now, but was a concern for me in the past.) I'm willing to part cash to be treated better in almost all cases.

Re: Give them an inch and they take $773 million

#22

Post by kamkazemoose » Wed, May 15, 2013, 5:52 AM UTC

kevingadd wrote: post #7

dangrossman wrote: post #4

I've been underestimating the size of the airline industry. I have a hard time reconciling the fact that the airlines always seem to be on the verge of bankruptcy with numbers this big -- $90+ billion a year in just passenger revenue.

The issue here is probably their margins, not their volume, though? It doesn't matter how much passenger revenue they bring in if the expenses (safety, security, regulation conformance, equipment maintenance, fuel, staff pay...) outweigh it.

It reminds me of the old quip "We lose money on every sale, but we make up for it in volume."

Re: Give them an inch and they take $773 million

#23

Post by daeken » Wed, May 15, 2013, 5:52 AM UTC

poink wrote: post #10

Being 6'5, my knees hate these numbers.

Agreed. I'm almost exclusively flying Jet Blue and Virgin and upgrading to their extended legroom seats at this point. I'm 6'2" and overweight -- not a good mix for the horrid seats in most coach sections.

Re: Give them an inch and they take $773 million

#24

Post by rgbrenner » Wed, May 15, 2013, 5:52 AM UTC

[deleted] wrote: post #9

Construct wrote: post #5

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]

" (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.

Re: Give them an inch and they take $773 million

#25

Post by chaz » Wed, May 15, 2013, 5:53 AM UTC

In 2006, JetBlue removed an entire row of seats:

  JetBlue estimates a net savings of $30 million over five years by removing
  six seats from the A320 fleet, as a result of reducing the inflight crewmember
  team to three, and by reducing the weight of the aircraft by approximately 904
  pounds, which will lower the fuel burn. That figure includes lost revenue
  opportunities as a result of selling six fewer seats per A320 flight. The figure
  does not include any revenue improvement that may result from the enhanced
  JetBlue Experience.

http://investor.jetblue.com/phoenix.zhtml?c=131045&p=iro...

Re: Give them an inch and they take $773 million

#26

Post by johnpowell » Wed, May 15, 2013, 5:54 AM UTC

quackerhacker wrote: post #3

Nice! When you account simple changes like this, it's amazing just due to the massive improvement. I could just imagine the saving for Walmart if they followed Ikea's model with doing away with plastic bags.

The Wal*Mart here doesn't have plastic bags but that is due to a city ordinance in Eugene. They charge five cents per paper bag but most people just bring in their own bags.

Re: Give them an inch and they take $773 million

#27

Post by sharkweek » Wed, May 15, 2013, 5:55 AM UTC

patio11 wrote: post #8

verroq wrote: post #2

>implying the flights stayed 80% full after new seats were added >implying decreased customer satisfaction didn't hurt their revenue >implying their systems didn't need to scale because of increased customers >implying their R&D on smaller legroom didn't cost anything >implying upgrading planes didn't cost anything >implying more customers on planes didn't have an impact on maintenance costs >implying revenue means a…

The prevailing theory among air carriers is that demand for flights is totally exogenous to the industry and allocation of flights between carriers in the industry is, for most customers (e.g. not frequent business travelers, who are price insensitive and care about mileage), dependent pretty much solely on price. Accordingly, minor decreases in comfort which add capacity are pretty much an auto-win. Many people disl…

As a tall guy I like to complain about airplane seating all the time. Once in a while I'm able to coax them into giving me an exit row; but that's beside the point.

Even with my height, I have not bought a plane ticket in the past 10 years with any brand loyalty or concern for comfort whatsoever. I don't even really care about the airline's track record of promptness, because the odds are still mostly in my favor it won't happen to "my" flight. I fly on whatever airline [insert flight pricing aggregation service here] says is the cheapest for my itinerary, maaaaybe taking into consideration that I might pay a bit more for nonstop, but even then sometimes if it means saving 50 bucks, for some reason I'm willing to go through the trouble of a multi-stop flight.

Re: Give them an inch and they take $773 million

#28

Post by peter_l_downs » Wed, May 15, 2013, 5:55 AM UTC

rgbrenner wrote: post #24

[deleted] wrote: post #9

Earlier quoted context omitted.

[deleted]

" (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.

Ah, I'm dumb.

Re: Give them an inch and they take $773 million

#29

Post by peter_l_downs » Wed, May 15, 2013, 5:55 AM UTC

patio11 wrote: post #19

[deleted] wrote: post #11

Earlier quoted context omitted.

[deleted]

Fuel costs are essentially linear with regards to weight, and accordingly dominated by putting several hundred tons of metal in the air. After you've made that decision, adding a marginal passenger is much, much, MUCH cheaper than the price of a ticket. The margins approach that of the last customer added to a SaaS company. (!) Airlines occasionally obscure this with regards to their public pricing rationales for ext…

Makes sense. Thanks for the correction.

Re: Give them an inch and they take $773 million

#30

Post by rgbrenner » Wed, May 15, 2013, 5:58 AM UTC

peter_l_downs wrote: post #28

rgbrenner wrote: post #24

Earlier quoted context omitted.

" (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.

Ah, I'm dumb.

Missing a detail doesn't make you dumb... I do it all the time. Too many examples to list here