Fuel costs may finally be down, but it’s now a revenue game for the airlines.
To wit, British Airways has just announced a 12.1 per cent fall in premium traffic last month — its biggest decline since April 2003 (the 26.4 per cent drop in that month impacted by the timing of Easter). That’s first- and business-class seats where investment bankers sit on those all-important trans-Atlantic client meetings. From their monthly traffic statement:
In December 2008, passenger capacity, measured in Available Seat Kilometres, was 3.0 per cent below December 2007. Traffic, measured in Revenue Passenger Kilometres, fell by 3.4 per cent. This resulted in a passenger load factor decrease of 0.2 points versus last year, to 76.7 per cent. Traffic comprised a 12.1 per cent decrease in premium traffic and a 1.7 per cent fall in non-premium traffic.
That load factor, the proportion of seats filled, being helped by the fact BA has been cutting capacity. Though the airline, to our knowledge, doesn’t publicly break out how much of its profit comes from premium seats, the last analyst estimates we heard put it at something over 50 per cent — at the least. A cursory glance at slide 129 from their March 2008 Investor Day presentation will give you an idea of just how much of their revenue came from banks.
BA’s low-cost European competitor Ryanair, true to form, timed a passenger number announcement of its own this afternoon. (Passenger numbers, it should be noted, differ to the traffic figures used by BA above, which are revenue passenger kilometres). Ryanair carried 11 per cent more customers in December, we’re told. Its load factor remained the same at 79 per cent.
Though we doubt Deutsche or Goldman Sachs are urging their employees to fly Ryanair just yet, could this perhaps be evidence that consumers — the non-banking civilian kind at least– are indeed trading down to discount carriers?
Related links:
Flying forces – FT Alphaville
Where have all the cowboys gone? – YouTube