Is low AGEX ultimately responsible for Slot Congestion and Expansion?

Has anyone put some thinking into the fact that low AGEX may be responsible for slot congestion and continuous expansion?

Improbable? Not quite so, I would say...very likely!

With Low AGEX airlines change to improved seating and increased pricing.

So let's say players change from Leisure to Recliner Shorthaul.

Now instead of 70% LF they get 90% LF or maybe even 100% LF.

But most importantly, flight is profitable again.

Once AGEX starts to grow back up, the recliner SH seat planes will be booked to 100%... so what does the player do?

Will he change back to Leisure seats, lower prices, etc? Of course not! First of all, it's a lot of work... so what they will do is they will schedule MORE FLIGHTS. Now that the passenger demand has increased, their flights will be full, even the newly scheduled ones. Maybe they will even need to create a new hub, because the old one has slot shortage, passengers are plentiful, and they do not care if they get from NYC to LAX via Chicago or via Omaha.

So the expansion continues... and slots keep filling up. If there were 20% slots left before AGEX fall, after the rise again those 20% will be gone.

Well, you may say... when the next AGEX downfall hits, the overcapacity will kill them..... actually, NOT! They will just upgrade the seats again, will put new flights (scheduled after last AGEX rise) from Leisure to recliner SH, etc. Maybe put some flights on smaller planes, etc. but they have now much bigger route power and connection passenger flow, because instead of 1-2 hubs now they have 3-4. So they maintain passengers within their network, instead of 20,000 flight combinations they serve now exponentially more flight combinations (100,000+). Unless they are really badly managed, they will survive the next AGEX fall with partially lower profits and fat cash reserves.

Yes, there will be a bad apple among the good ones, and occasional bankruptcy will happen because of falling AGEX... but they will be few and far between.

Thoughts?

I think there is some truth within that theory, though it might not be the only truth.

A driver for the current seat config is, that profitability is slightly skimmed to advanced seats. Especially in times with low AGEX, but also from my point of view, during higher AGEX levels. Seats of lower quality remain profitable on all levels, how ever they are much harder to manager - in terms of volume and in terms of price. 

So coming back to your theory - I think what's driving slot congestion primarily is an slightly unbalanced distribution between 'normal' and 'better seats'  which is accelerated by low AGEX levels. So the AGEX itself is in my opinion not the primary driver of slot congestion.

Beside of this theory, there are many reasons for slot congestion, that were present long before the new seats and even before the AGEX. So it's probably a new, more dynamic dimension of this issue.

Hi George,

what you describe is probably happening, but not on a big scale. The total number of seat capacity (weekly offered seats on the Tempelhof server) grows at a rate of 1 million extra seats per week. This growth has more or less been stable over the past six months.

If everybody was replacing his existing cabin configurations by bigger seats, the number of offered seats should decrease. Or the growth should at least slow down considerably. And that has not been the case.

If my memory is correct, the AGEX was introduced two years ago. And as FlyHigher pointed out, slot congestion already existed before then.

In my opinion the main reason for slot congestion is simply too many passengers  :-)

As long as passengers book seats, airlines will expand. And they keep expanding until they run out of slots or until they kill themselves (because of overcapacity). The new AGEX has lost its bite*, so airlines grow until they run out of slots.

Jan

* with the old AGEX, 100 points equalled 10% of passenger demand. With the new AGEX, 100 points equal 5% of passenger demand. At least, that is a rough estimate based on the evolution of the AGEX and the number of booked seats over the past months.

IMO, the prime factor for slot congestion always was and still is an overly simplified performance-model as well as bookings being so dependend on connections.

As long as a widebody has higher costs per seat than a narrow body (or even regio jet on longer routes!) people prefer having three dailies on a 73J instead of just one daily on a 748.

The 3x daily 73J on top fetches more connections (more pax!) than the single flight.

Lower costs per seat + more connections = more dollars at less financial risk => congested slots.

The AGEX sure is a driver and additional motivator for this.