The reason we don’t do it is because its trickier than trying to put socks on a badger! Andrew Myers explains why we take this approach.
It is ten years since Aviation Analytics launched its unique low-cost carrier (LCC) network performance tool, Network Grandstand, which we still believe to be the most accurate on the market.
The reasons for this are that we have the most experience of anyone in this field of analysing airline accounts data, we collect the largest number of fare data points (10 observations over a six-month period), but perhaps most importantly, Aviation Analytics only estimates average fares and profitability for LCCs. This blog explains, by means of a worked example, how the complexity of the long-haul model can lead to cumulative errors which render the result invalid.
The LCC model, through its simplicity, has lent itself reasonably well to a certain level of ease in predicting whether a route is profitable or not. Even here though, any numbers that are presented are still subject to a margin of error.
Take care with airport charges
The average fare is dependent on predicting the booking curve up to the point of departure, where it is essential to take as many sample points as possible (at least eight to 10). Then the ancillary revenue needs to be predicted. This will vary by type of route and season. Finally, care must be taken with the operating costs to ensure that the airport charges are close to what the airline is actually paying rather than the published charges.
Thankfully load factors and aircraft types are pretty stable and the overall simplicity of the model means that if the complete network data set is observed, the end result can be calibrated to the airline’s accounts to give a reasonably accurate route by route picture. Even then, we would be reluctant to say that an actual figure is completely accurate, so here at Aviation Analytics we colour code the routes by profit margin instead, with green routes being the ones we think are making money, yellow breaking even and orange/red losing money.
We believe that taking the colour coding as the basis, the overall picture of a network, or airport base health can be established. Indeed, in a recent season 88% of easyJet routes that were cancelled were either orange or red. Network Grandstand allows the user to group by airport, city and country to provide benchmarking analysis for both existing and new routes.
Full-service, and especially long-haul, is a completely different matter. The attached graphic, which will be explained in the next blog in more detail explains why…