It is clear that the 2022 fares are of limited relevance to this exercise as on some routes they are very low as airlines are just desperate for any
It is clear that the 2022 fares are of limited relevance to this exercise as on some routes they are very low as airlines are just desperate for any passengers while on routes where there is no alternative they may actually be very high.
It is perfectly OK therefore to ignore the 2022 fare data and base your prices on your cost calculations in order to obtain a break-even or profitable result.
As historic 2019 fare data is no longer available, I have constructed some typical 2019 fares for different lengths of route below excluding taxes (and also excluding ancillary charges such as luggage or seat selection on the cheaper fare types).
THESE ARE RETURN FARES SO YOU NEED TO HALVE THEM IF WORKING ON ONE WAY FARES
Routes up to 800 km
Network carriers: Business Flex 600, Economy Flex 500, Business Fixed 300, Economy Fixed 100-200
easyJet or other LCC: Flex 300, Economy Fixed 75-150
Ryanair or Wizz: Flex 200, Economy Fixed 50-100
Routes 800-1600 km
Network carriers: Business Flex 800, Economy Flex 650, Business Fixed 400, Economy Fixed 135-270
easyJet or other LCC: Flex 400, Economy Fixed 100-200
Ryanair or Wizz: Flex 270, Economy Fixed 70-140
Routes over 1600 km
Network carriers: Business Flex 1000, Economy Flex 800, Business Fixed 500, Economy Fixed 170-340
easyJet or other LCC: Flex 500, Economy Fixed 125-250
Ryanair or Wizz: Flex 340, Economy Fixed 90-180
To calculate the total operating costs:
In my example below the airline is doing 3 round trips per day with a 100 seat aircraft on London City-Amsterdam (347 km)
First find the number of flights you are operating per year:
3 frequencies x 2 directions x 365 days per year = 2190 flights per year
Then multiply that by the number of seats on your aircraft (100):
2190 flights x 100 seats on each flight = 219 000 seats per year
Multiply by the distance of the route (347 km) to get the number of Available Seat Km per year:
219 000 x 347 = 75 993 000 ASK per year (i.e. 76 million)
Multiply by the cost per ASK of a chosen similar airline - to obtain a total annual cost for your airline:
In this case I am using a cost per ASK of 12.6p as it is a short flight with a small aircraft
75 993 000 x 0.126 = 9 575 118 (i.e. 9.6 million pounds per year)
The number of seats from above was 219 000 so we apply a load factor to obtain the number of passengers (this could alternatively be found from your estimates of market share and traffic carried which you have then matched to a suitable aircraft size and frequency)
If the load factor you are planning for is 80% (look at similar airlines/routes in the ICAO data)
Then the number of passengers carried is 219 000*0.8 (we multiply by the load factor to get from seats to pax - and divide if going the other way round and converting pax to seats)
= 175 200 pax are carried
So the average one way fare required to break-even is Total cost/number of pax
= 9 575 118/175 200
= 55 (these are all based on one way pax and one way fares)
To make a profit we need an average fare of about 60 one way
So something like
25% of pax at 40
50% of pax at 60
25% of pax at 80
Would work
Or with a business class
25% of pax at 30 (Y)
65% of pax at 50 (Y)
10% of pax at 200 (Business)
For total revenue:
175 200 pax
First pricing scale:
(175 200*0.25*40)+(175 200*0.5*60)+(175 200*0.25*80) = 1 752 000 + 5 256 000 + 3 504 000
= 10 512 000 (10.5M) total revenue
Profit is Revenue-Cost = 10.5M-9.6M = 0.9M
Second pricing scale:
(175 200*0.25*30)+(175 200*0.65*50)+(175 200*0.1*200) = 1 314 000 + 5 694 000 + 3 504 000
= 10 512 000 total revenue
so the same profit as above but obtained with a different fare mix
ICAO data
All students are subscribed to the ICAO data which is particularly useful for dissertations and also some coursework tasks:
This enables you to e.g. find load factors and market shares for existing airlines on the route use 2018 or 2019 Traffic by flight stage as 2020 data incomplete
Traffic by flight stage
Air carrier fleet
Air carrier personnel
On-flight O+D
Air carrier finances
Airport traffic
Air carrier traffic
Go to https://data.icao.int/newDataPlusLogin: icaondennisPassword: Fitzrovias@8
Click on apps (then if necessary click on sign in again) and you should be in the apps will show Launch once you have successfully logged in
N.B. It is necessary to go back a few years as 2021 and 2020 will not be complete. Try 2018 or 2019. Unlike the CAA the traffic data is directional so there is one entry for London-Vienna and another for Vienna-London.
CAA data
The CAA website (UK) www.caa.co.uk is free to use for top level data. Go to Data and Analysis. There is airline traffic and financial data, route traffic, airport traffic, punctuality statistics and the airport passenger survey. These are mostly quite up to date but be careful to find the annual data rather than the monthly data if that is what you want.
Unit cost calculations from CAA data
Choose a similar airline to yours e.g. BA Cityflyer for LCY, flybe for short routes with small aircraft, easyjet for LCC on shorter routes, Jet2 for LCC on longer routes
You can adjust the answers up or down to reflect the particular features of your operation
The calculation of unit costs for BA Cityflyer from the CAA data UK Airlines Financial report 2014-15 Tables 6 and 9:
Total operating expenses 159 650 (figures in thousands) Table 6
Seat km available is 1 921 034 (figures in thousands) Table 9
So cost per seat km is 159 650/1 921 034 = 8.3p
If your route is 1000km then cost per seat (one way) = 1000 x 0.083 = 83
If your target load factor is 75% then your cost per pax is 83/0.75 = 111
You need to obtain on average 111 from each one way passenger to break-even which should guide your pricing structure
ONS data
ONS data you can find journey purpose splits by country from the ONS data (not essential but may be interesting or useful for something else in due course)
UK residents visits abroad
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/ukresidentsvisitsabroaddownload 2019 edition of this dataset
use the tabs at bottom of page to go to Table 5.04 for journey purpose split by country visited
the equivalent information for foreign visitors to the UK is shown in
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseasresidentsvisitstotheukdownload 2019 edition of this dataset
use the tabs at bottom of page to go to Table 4.04 for journey purpose split by country of origin
ICAO data
All students are subscribed to the ICAO data which is particularly useful for dissertations and also some coursework tasks:
This enables you to e.g. find load factors and market shares for existing airlines on the route use 2018 or 2019 Traffic by flight stage as 2020 data incomplete
Traffic by flight stage
Air carrier fleet
Air carrier personnel
On-flight O+D
Air carrier finances
Airport traffic
Air carrier traffic
Go to https://data.icao.int/newDataPlusLogin: icaondennisPassword: Regentstreet@8
Click on apps (then if necessary click on sign in again) and you should be in the apps will show Launch once you have successfully logged in
N.B. It is necessary to go back a few years as 2021 and 2020 will not be complete. Try 2018 or 2019. Unlike the CAA the traffic data is directional so there is one entry for London-Vienna and another for Vienna-London.
CAA data
The CAA website (UK) www.caa.co.uk is free to use for top level data. Go to Data and Analysis. There is airline traffic and financial data, route traffic, airport traffic, punctuality statistics and the airport passenger survey. These are mostly quite up to date but be careful to find the annual data rather than the monthly data if that is what you want.
Unit cost calculations from CAA data
Choose a similar airline to yours e.g. BA Cityflyer for LCY, flybe for short routes with small aircraft, easyjet for LCC on shorter routes, Jet2 for LCC on longer routes
You can adjust the answers up or down to reflect the particular features of your operation
The calculation of unit costs for BA Cityflyer from the CAA data UK Airlines Financial report 2014-15 Tables 6 and 9:
Total operating expenses 159 650 (figures in thousands) Table 6
Seat km available is 1 921 034 (figures in thousands) Table 9
So cost per seat km is 159 650/1 921 034 = 8.3p
If your route is 1000km then cost per seat (one way) = 1000 x 0.083 = 83
If your target load factor is 75% then your cost per pax is 83/0.75 = 111
You need to obtain on average 111 from each one way passenger to break-even which should guide your pricing structure
ONS data
ONS data you can find journey purpose splits by country from the ONS data (not essential but may be interesting or useful for something else in due course)
UK residents visits abroad
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/ukresidentsvisitsabroaddownload 2019 edition of this dataset
use the tabs at bottom of page to go to Table 5.04 for journey purpose split by country visited
the equivalent information for foreign visitors to the UK is shown in
https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/datasets/overseasresidentsvisitstotheukdownload 2019 edition of this dataset
use the tabs at bottom of page to go to Table 4.04 for journey purpose split by country of origin
