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Give them an inch and they take $773 million

notes.unwieldy.net

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

#51

Post by mrshoe »

In addition to the sketchy mathematical foundation, there's another reason to not draw too many conclusions from this observation: your company, product, and customers are probably quite unlike Southwest Airlines. For starters, airline customers care almost exclusively about price.

Joel Spolsky was wise to warn against doing what this article suggests (http://www.joelonsoftware.com/items/2007/09/11.html):

    In one of Gerald Weinberg's books, probably The Secrets of Consulting, 
    there's the apocryphal story of the giant multinational hamburger chain
    where some bright MBA figured out that eliminating just three sesame
    seeds from a sesame-seed bun would be completely unnoticeable by anyone
    yet would save the company $126,000 per year. So they do it, and time
    passes, and another bushy-tailed MBA comes along, and does another study,
    and concludes that removing another five sesame seeds wouldn't hurt
    either, and would save even more money, and so on and so forth, every
    year or two, the new management trainee looking for ways to save money
    proposes removing a sesame seed or two, until eventually, they're
    shipping hamburger buns with exactly three sesame seeds artfully arranged
    in a triangle, and nobody buys their hamburgers any more.

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

#52

Post by ericd »

tiredofcareer wrote: post #44
mehwoot wrote: post #38

Earlier quoted context omitted.

For most customers, maybe, but I suspect there's a pretty sizable portion of the population Yup, and for those two things you mention that you are willing to pay more for, there are probably 98 other things you aren't. Each person will have the things they are willing to pay more for, and most will be different, so for most services, 98% of people are going to choose the cheaper option. Hence most companies won't giv…

I wouldn't be so sure. I pay a rent premium for a view.

Yeah, apartments aren't a commodity (they're pretty much the farthest from, given their absolute uniqueness in terms of location). Plane seats are, unfortunately.

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

#53

Post by switch007 »

kayoone wrote: post #50

UKs Ryan Air was even proposing ideas of having people stand during flights (yep, its really that ridicolous) and letting people pay to use the lavatories... Not that they would get through with that but still, they are searching for every inch to make more money.

Those crackpot schemes are just designed to get their brand in the Daily Mail and in turn, for people to talk about Ryanair. (their headquarters are in Ireland, not the UK)

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

#54

Post by JulianMorrison »

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.

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.

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

#55

Post by lifeisstillgood »

ojbyrne wrote: post #45
lifeisstillgood wrote: post #43

Earlier quoted context omitted.

I recently bought an uncomfortable flight - mostly because there was no information on legroom on the purchasing system (designed in '70s and wrapped in web goodness) Ultimately until the information to differentiate between flights is provided at POS all anyone can judge on is price. A poster below has enough flight experience to know that United has less legroom and he is willing to pay a premium to avoid that. How…

http://www.seatguru.com/

Like I said knowledge external to the transaction.

Take their info, place it in the SABRE (?) booking system and allow seat prices to vary by legroom and then airlines are competing on something other than price.

(To be honest I expect there are things they will find more useful to compete on)

Plus - when I have to wade through 100 differen options of legroom, childcare, airport parking and fligh routes I will pray for a return to the old days.

I have a sneaking suspicion the airlines are right - we do just see them as a bus from A to B.

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

#56

Post by ErrantX »

endtwist wrote: post #12
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.

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

There are a number of factors in play. But without knowing how the priced seats, and the number of capacity flights, this could just as easily be normal growth as it could be the impact of extra seats.

Not that I'm saying you are wrong, just that it's not the only explanation of the known facts.

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

#57

Post by ohazi »

kamkazemoose wrote: post #18
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.

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.

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

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

#59

Post by ohazi »

kayoone wrote: post #50

UKs Ryan Air was even proposing ideas of having people stand during flights (yep, its really that ridicolous) and letting people pay to use the lavatories... Not that they would get through with that but still, they are searching for every inch to make more money.

Honestly, after sitting at my desk all day/week... I actually wouldn't mind standing on my usual 50 minute Southwest flight. Not that the FAA would ever allow it.

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

#60

Post by shabble »

chaz wrote: post #25

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 fl…

coming next, Responsive Seating!

per-flight configurable seat modules, for exactly the number of people on board, and can be quickly loaded/unloaded to minimise excess weight. Installed seats adjust their clearance automatically based on available space and user's ticket price/options.

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