Why cheap airlines are so cheap • Hacker News Board

Re: Why cheap airlines are so cheap

#31

Post by nihilocrat » Sat, Jun 27, 2009, 4:48 PM UTC

dazzawazza wrote: post #4

I'm 6'2" and I don't fit in Ryan Air or Easy Jet planes :( I took and Easy Jet from London to Berlin (~1 hour) and I had to sit at an angle much to to consternation of the poor bloke sitting next to me. I'm happy to pay for the more expensive carrier to get a better user experience. You can tell I'm a mac user can't you ;) It's interesting to see how they save money. As well as hacking the system I think the LCC hack…

The airline/subway comparison is a little bit apples to oranges. I don't know about you, but I rarely travel, so I don't mind being subjected to discomfort for a few hours. However, for a daily commute, it's annoying to get shipped around "like cattle" every day.

Re: Why cheap airlines are so cheap

#32

Post by [deleted] » Sat, Jun 27, 2009, 4:53 PM UTC

tptacek wrote: post #28

bendotc wrote: post #26

Earlier quoted context omitted.

"Discount air carrier Southwest Airlines flew thousands of passengers on aircraft that federal inspectors said were 'unsafe' as recently as [March 2007]." http://www.cnn.com/2008/US/03/06/southwest.planes/index.html

Uh huh. Compare the incident records of Southwest and any major carrier, and then get back to us. The real cost/safety tradeoff in air travel is between national carriers and the rebadged regional carriers that do the short-hop fights for the nationals. Southwest doesn't have any such arrangements, but all the majors do.

[deleted]

Re: Why cheap airlines are so cheap

#33

Post by look_lookatme » Sat, Jun 27, 2009, 4:54 PM UTC

bendotc wrote: post #26

look_lookatme wrote: post #22

Earlier quoted context omitted.

" I would imagine there is a business opportunity for airlines which are willing to cut costs in every way other than safety and passenger space" Are you implying the current crop of low cost carriers are somehow "unsafe"? You would be very wrong (at least in the US). Also, such a carrier exists. It's called Jet Blue.

"Discount air carrier Southwest Airlines flew thousands of passengers on aircraft that federal inspectors said were 'unsafe' as recently as [March 2007]." http://www.cnn.com/2008/US/03/06/southwest.planes/index.html

http://edition.cnn.com/2008/US/03/07/southwest.planes/index....

"Boeing Inc., the plane's manufacturer, which was contacted when the problems arose, said that at no time were the cracks unsafe, Kelly said. "Cracks do occur. That's why we do inspections.""

Also

""In this particular situation, we identified a gap in our documentation. We voluntarily reported that to the FAA. We worked out with the FAA how to fix that problem, and we fixed it," he said on CNN's "American Morning.""

But you know what? I'll concede, that was a huge blunder on Southwest's part. However, they found it in a safety audit and took all appropriate actions. Still, that should never happen.

Moving on, let's look at their safety record. From http://www.airsafe.com/events/airlines/luv.htm

"Southwest Airlines has not had any fatal events involving a passenger since it began service in 1971."

Take a look at this chart and compare the "passenger" fatalities per flights flown, to the other more expensive airlines.

http://www.airsafe.com/airline.htm

We can also look at a general crash database:

http://www.airdisaster.com/cgi-bin/airline_detail.cgi?airlin... http://www.airdisaster.com/cgi-bin/airline_detail.cgi?airlin... http://www.airdisaster.com/cgi-bin/airline_detail.cgi?airlin...

and Southwest

http://www.airdisaster.com/cgi-bin/airline_detail.cgi?airlin...

(southwest has operated since 1971 so you should keep limit your scope of crashes to those years for the other airlines)

Re: Why cheap airlines are so cheap

#34

Post by evgen » Sat, Jun 27, 2009, 5:08 PM UTC

tptacek wrote: post #27

scscsc wrote: post #18

I have never used the so-called low cost airlines. However I have problems fitting my knees even in high cost economy class. I would imagine there is a business opportunity for airlines which are willing to cut costs in every way other than safety and passenger space (i.e. we don't need those lounges).

This is exactly the business model Midwest Express/Midwest Airlines pursued; a single-class cabin, 2x2 with first class-style seats. There was typically a $50-$150 premium on Midwest seats.

Don't forget the freshly baked chocolate chip cookies :)

Re: Why cheap airlines are so cheap

#35

Post by arihelgason » Sat, Jun 27, 2009, 5:22 PM UTC

fauigerzigerk wrote: post #25

Something I find astonishing is that the passenger/employee ratio of no-frills airlines is more than 10 times that of traditional airlines, yet all the labour related savings together seem to make up a relatively small part of overall savings. Any explanation for that?

My guess is that it's because labour is not a very large % of overall costs.

A similar example is the car industry. Car manufacturing plants are often located in high wage countries, simply because labour does not represent a large % of the overall cost of producing a car.

Re: Why cheap airlines are so cheap

#36

Post by hjnghgbi » Sat, Jun 27, 2009, 6:18 PM UTC

Boxer wrote: post #24

vinutheraj wrote: post #8

Earlier quoted context omitted.

But is safety still high on their priority list though ?!

Well, what fraction of cheap flights have crashed vs. normal flights?

Easyjet, Ryanair, Westjet - no accidents. Southwest had a jet overrun a landing and kill a passenger in a car outside the airport.

Compare this with KLM (worst accident ever), BA, Air France etc. And bear in mind that budget carriers operate the most 'dangerous' routes, short hop frequent take-off landing all weather - not the 'safest' transpacific long haul routes.

Re: Why cheap airlines are so cheap

#37

Post by hjnghgbi » Sat, Jun 27, 2009, 6:19 PM UTC

seanos wrote: post #14

matthewking wrote: post #6

How about rickety old planes that make all sorts of dodgy noises on take off? That's my experience of one of the cheap airlines in particular. Is there any information out there to show the average age of their planes? if they are different then that's a major factor that should be in the comparison.

I don't know about the others, but Ryanair has the youngest aircraft fleet in the world. I'm guessing the others will have fairly new planes too because they are cheaper to run.

And you get a very nice discount if you go to Boeing when the rest of the industry is in a downturn an order 500 737s. Even better if like Ryan you do it while also talking about buying Airbuses instead.

Re: Why cheap airlines are so cheap

#38

Post by tptacek » Sat, Jun 27, 2009, 6:45 PM UTC

evgen wrote: post #34

tptacek wrote: post #27

Earlier quoted context omitted.

This is exactly the business model Midwest Express/Midwest Airlines pursued; a single-class cabin, 2x2 with first class-style seats. There was typically a $50-$150 premium on Midwest seats.

Don't forget the freshly baked chocolate chip cookies :)

... unfortunately, they appear to have failed.

Re: Why cheap airlines are so cheap

#39

Post by mediaman » Sat, Jun 27, 2009, 6:54 PM UTC

arihelgason wrote: post #35

fauigerzigerk wrote: post #25

Something I find astonishing is that the passenger/employee ratio of no-frills airlines is more than 10 times that of traditional airlines, yet all the labour related savings together seem to make up a relatively small part of overall savings. Any explanation for that?

My guess is that it's because labour is not a very large % of overall costs. A similar example is the car industry. Car manufacturing plants are often located in high wage countries, simply because labour does not represent a large % of the overall cost of producing a car.

Labor is actually a substantial part of airlines' expenses.

Southwest's most recent SEC filing indicates that its 35,000 employees represent 32% of its total operating costs, or about $3.4bn. These employees served about 101.9 million passengers. [1] That's about 2,911 passengers per employee, or $33 of labor cost per passenger.

A traditional airline such as American Air, with 70,900 employees, has labor costs of $5.9bn, serving just 98 million passengers [2], which is 1,382 passengers per employee or $60 labor cost per passenger. So costs per passenger are almost 2X.

That makes me question the data in this chart. The only two data points related to labor are crew costs (3% of savings) and administration (2%). But actual labor costs appear to be a much more substantial part of the savings.

[1] http://www.sec.gov/Archives/edgar/data/92380/000119312509015...

[2] http://www.sec.gov/Archives/edgar/data/4515/0000004515090000...

Re: Why cheap airlines are so cheap

#40

Post by fauigerzigerk » Sat, Jun 27, 2009, 7:06 PM UTC

mediaman wrote: post #39

arihelgason wrote: post #35

Earlier quoted context omitted.

My guess is that it's because labour is not a very large % of overall costs. A similar example is the car industry. Car manufacturing plants are often located in high wage countries, simply because labour does not represent a large % of the overall cost of producing a car.

Labor is actually a substantial part of airlines' expenses. Southwest's most recent SEC filing indicates that its 35,000 employees represent 32% of its total operating costs, or about $3.4bn. These employees served about 101.9 million passengers. [1] That's about 2,911 passengers per employee, or $33 of labor cost per passenger. A traditional airline such as American Air, with 70,900 employees, has labor costs of $5.…

There's probably some labour cost hidden in other categories as well, like station costs and reservation costs. But still, I'd expect labour to rank much higher considering that 10:1 productivity advantage.

There's actually another thing that's surprising. Low cost airlines, at least in europe, have a younger fleet of aircraft using less fuel. That doesn't seem to figure in the chart either.