December 14, 2018

Commercial Aviation Part 3

Earlier, I talked about how airlines sell tickets, to get the most money out of their passengers. This time, I’m going to talk about the mechanical process of getting those passengers where they want to go. The basic problem is that there are an almost arbitrarily large number of combinations of A and B people want to travel between, and it’s obviously impractical to have direct service between all of them. Different travelers want different things, and the whole system is constrained by available airplanes and airports.


MD-83 of Allegiant Air

So, how do we take the planes I talked about last time, plus all of the airport infrastructure, and create a route network that will get people where they want to go? This is hard to describe from first principles, so we’ll examine a couple of airlines to see how they do things.

We’ll start with Allegiant. Allegiant has a unique business model among US airlines. It flies older narrowbodies (MD-80s and now used A319s and A320s) between minor airports (where it’s often the only scheduled air service) and major leisure destinations (their biggest airports are Orlando and Las Vegas), often only a few times a week. This is totally unacceptable for the business market, but it works well for leisure travelers. Allegiant has low base fares, and makes a lot of its money on ancillary revenue, things like checked and carry-on baggage, drinks, and seat selection. They also make sure that they don’t leave crews overnight away from their base (usually the leisure destination, although they do have bases in places like Cincinnati for reasons I don’t understand), saving them from having to pay for hotel rooms. The older planes Allegiant flies are less fuel-efficient, but are also maybe 10% of the cost of new airplanes of comparable size, and they can afford to fly them about half as many hours per day as other carriers do. They don’t offer connections or many other services that bigger airlines do, which saves them money and effort. Allegiant is also the only airline I know of that allows passengers to change the name on their tickets for a fee. Most airlines do not allow this because it can mess with their revenue management.


Ryanair 737

More typical Low Cost Carriers (LCCs) operate on a similar model, catering mainly to leisure-type travel, but in different markets. The best US example is Spirit, while Ryanair and EasyJet in Europe are major players. These airlines fly bigger routes, relying on low costs to let them set fares lower. Costs are held down by packing more people into planes, relying on ancillary revenue, and reducing labor and operating costs via a wide variety of tactics. Ryanair, for instance, has seats that do not recline, and offers no in-flight entertainment. They charge extra to check in at the airport, to reduce staffing there. It would remove the window shades to save weight, but the Irish Aviation Authority requires them. There is only one class of seating (cattle). Rumors that they’re going to charge for the bathroom are usually started by the CEO when Ryanair drops out of the news. They also hold down operating costs by only flying one kind of airplane, which means they only need to train their pilots and mechanics on one type. Most LCCs seem to operate about 2 airplanes per destination, allowing daily frequencies on most routes. Allegiant flies about 0.5 airplanes per destination, and flies them less per day.


Southwest 737 dedicated to their founder, Herb Kelleher

Southwest Airlines is an interesting hybrid of LCC and legacy carrier, along with some elements that are unique to it. Unlike most LCCs, they offer connecting flights, and operate a proper network, making it feasible to fly between any two airports Southwest serves, usually with only one transfer, although in some cases their service from certain airports is clearly targeted at specific markets, and they’re better at offering point-to-point service than the legacy carriers. For instance, out of Long Beach their focus is clearly on moving people north along the West Coast. Try to fly east, and it’s expensive and the connections are bad. However, they only fly 737s, and do not have a widebody/international presence. (Flights to Mexico and Caribbean destinations are much more like domestic flights than long-haul flying.) They do not offer assigned seating, which encourages people to board quickly, and also do not charge for checked bags. This was at least partially the result of IT limitations until recently, but it’s also a major part of Southwest’s brand. Southwest has 7 airplanes per destination, giving it the high frequencies necessary to attract business travelers.


A Delta Embraer E175 regional jet

Now we come to the legacy airlines, in the US the big 3 of United, Delta and American. These can be broadly divided into three branches based upon the type of airplanes they fly. Basically, you can move between any two points in the US on any of these carriers. It might be expensive, but they’ll get you there reasonably quickly. They also have extensive international networks.

A mix of narrowbodies and regional jets fly virtually all domestic routes. The regional jets (which are capped at 76 seats) are operated as a sub-brand (American Eagle, United Express, Delta Connection) by a variety of contracted operators. This is a historical artifact, due to high labor costs at the main airlines. Between the growing pilot shortage and a reduction in airline labor costs due to bankruptcy, the regional airlines are slowly losing market share. They fly routes too ‘narrow’ for a full-sized narrowbody, allowing the legacy carriers to offer higher frequencies and more options to their passengers.


A 737-MAX8 of American

The legacy carrier’s domestic routes are designed to move people from one point to another through their hubs, a very different model from that used by the LCCs. The most famous hub is Delta’s in Atlanta, but cities like Dallas, Chicago, Houston, and LA all serve as major hubs for the legacy carriers. Many airports only offer flights to the hubs, and trying to go between two close non-hub cities could require a transfer at a hub much further away. On the other hand, the hub gives the airline the ability to offer service to a much greater range of destinations with a single stop than they could make work using point-to-point flying. Some hubs are ‘banked’ with large numbers of flights arriving and departing at about the same time. This reduces the amount of time passengers have to wait on their connections, but is expensive because much of the infrastructure has to sit idle between banks, and carries risks if flights are delayed. Also, some airports (most notably those in the New York area) have a restricted number of takeoff/landing slots, which limits the amount of traffic that can be put through them.


A United 787 widebody

These hubs also serve as the launching point for the legacy carrier’s international flights. These are fed by the flights into the hub, and operated mostly by widebodies. At one time, only the biggest widebodies could handle true long-haul flying, which meant that only routes with very high demand could be flown. Medium-sized cities had limited service to very large cities on the other side of the ocean, and medium-to-medium was unknown. The advent of the 787 and A350 have significantly improved the economics of medium-to-medium routes, giving travelers many more options, and bringing international service to cities which previously did not have it, or which lost it when airlines closed hubs there.

These three different models provide different levels of cost and service to cater to different types of travelers, but combine to provide a marvelously efficient system for moving people around the country, and indeed around the world.

Comments

  1. December 17, 2018AlphaGamma said...

    Another aspect of the Ryanair/LCC model is their choice of airport. Ryanair in particular are infamous for flying to cheaper airports further from a major city, such as Paris-Beauvais (more than 50 miles from Paris) or Frankfurt-Hahn (75 miles from Frankfurt). In one case they even advertised flights to "London Prestwick" which is in Scotland!

    In other cases, the airport is just generally in the middle of nowhere, although in quite a picturesque area- such as Dinard-Pleurtuit-Saint-Malo in northern France. I have heard that in some of these cases the passengers are the product- Ryanair are paid by the airport (in the form of reduced landing fees or even a revenue guarantee), which in turn can be subsidised by local government, in order to bring in tourist traffic to the area.

    Sometimes this backfires amusingly. A friend of a friend worked in the tourist office in Rodez Airport in south central France, which had Ryanair flights to Stansted. A large part of her job was apparently dealing with British tourists who thought they had bought tickets to the Greek island of Rhodes...

  2. December 17, 2018Johan Larson said...

    Any idea what's going to be done about that growing pilot shortage?

    I suppose the simple answer would be to pay more. As I understand it, entry-level pilots with the regional airlines are paid peanuts right now.

  3. December 17, 2018bean said...

    @AlphaGamma

    For some reason, I seem to have forgotten to mention that. I know about some of the more infamous examples, although London Prestwick is a new low, and I'm amazed the Scottish government didn't try to ban them for that. Revenue guarantees and other subsidies are very common for small airports trying to lure service in the US, too. Sometimes it's Allegiant, sometimes it's the legacies who play that game.

    And I feel sorry for your friend.

    @Johan

    The pilot shortage will probably work itself out in time. Traditionally, you were a junior pilot at the regionals until you built enough flight time to go to one of the majors, and then you made money. Over the last decade or so, there was a glut of pilots, and so lots of people got stuck in those jobs. That dissuaded people from trying to become pilots. Add in some tightened FAA regs making things harder, and you have a problem when the economy improves and you work through the pilot backlog. They're trying to lure people into the cockpit, but it takes time to get them there. Also, there's an issue with who pays for the training, because airlines have no real incentive to make that investment, as the pilots can just walk.

  4. December 17, 2018doctorpat said...

    "Also, there’s an issue with who pays for the training, because airlines have no real incentive to make that investment, as the pilots can just walk."

    Though this problem is a general issue that applies to many careers that have a shallow learning curve. If someone takes years of training and experience to be a valuable employee, at which point they can get a better job, then nobody will provide the entry level jobs at what is basically a subsidy for their competitors.

    Two generations ago, when people and employers had long term loyalty, the problem was minor, but since that relationship broke down it's been a constant source of stress for both the employees and employers.

    There are a couple of approaches to solve it: - Have the low level, training jobs provided by government corporations, that are prepared to just be the patsy. - Have the high paid advanced job be so good that people are prepared to do the training jobs for extremely low pay, so that it's still worth providing them (see medical residents). - Mix the training stage in with enough specialised, company specific detail that jumping ship is not that easy. - Various legal approaches about non-compete clauses and so forth, but this approach keeps breaking down in courts and when a competitor works a way around it.

    But this is still an unsolved problem.

  5. December 18, 2018AlphaGamma said...

    London Prestwick is a new low, and I’m amazed the Scottish government didn’t try to ban them for that

    It was only in one ad in a Norwegian newspaper, and Ryanair claimed it was a typo. I suspect it was more of their 'any publicity is good publicity' advertising- see also charging for bathrooms, standing-room-only flights, etc.

    Also, civil aviation in the UK is a reserved matter, so the Scottish government doesn't regulate it, the UK government does.

  6. December 18, 2018bean said...

    I suspect it was more of their ‘any publicity is good publicity’ advertising- see also charging for bathrooms, standing-room-only flights, etc.

    That's entirely plausible, although I'd be inclined to suspect a typo. Most of the "any publicity" stuff is tied quite closely to "we're trying to make flying as cheap as possible", and "we don't proofread our advertising closely and pass the savings on to you" isn't a particularly good message.

    Also, civil aviation in the UK is a reserved matter, so the Scottish government doesn’t regulate it, the UK government does.

    I'm pretty sure that wouldn't stop the SNP from taking extreme umbridge.

  7. December 18, 2018Johan Larson said...

    It seems to me the FAA could help a bit in several ways to ease the way from flight school to the copilot seat. They could lower the number of flight hours needed for cargo flights and smaller aircraft. They could let type-specific simulator time substitute to some extent for actual flying. And they could also allow less experienced pilots to serve as copilots as long as they don't use the busiest airport. All of these would help to some extent by allowing a more gradual ramping up of responsibilities.

    I'm sure these are all radical novelties that have occurred to absolutely no one in the business.

  8. December 19, 2018bean said...

    Some of those are in place now. If you're flying in certain categories (9 or fewer passengers, for instance), it's possible to go without a copilot, or fly one with a lot fewer flight hours than normal. I'm not so sure about similar derestrictions on all cargo flying. While there are fewer people onboard to kill if something goes wrong, a 747-8F is still a big, heavy thing, and I'd really rather it didn't go down on top of me.

    But I think things will get better as the regionals finally transform themselves from the farm team into places that are reasonable to work. In terms of training, I've seen claims that the situation in the early 2000s was abnormal, and that in decades past, competitive applicants to the regionals had about the same number of hours they're required to have now. The FAA merely made that mandatory instead of preferred.

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