i just started new airlines but i think that i am doing something wrong.
I bought leased CRJ700 and scheduled flight, but when i visit Flight information card where is displayed all of the cost etc. then i see that here is no way to be in profit even if i fill up every seat.
Helsinki to Prague (64 Economy - 132AS$ per PAX / Business 282AS$ per PAX)
= 10 704AS$ (- 15 809AS$ TAX = -5105AS$)
This happen in every destination (including small airports). If i buy larger plane then i can sell more seats but then whole flight will cost much more because of leasing and fuel.
Don't buy planes but lease them. Restart your company and lease. I don't know which server you are playing but I would recommend you not to start in Europe or the US or China. Find a smaller country which is free (no competitors) and start there slowly. You might be able to buy planes after your company has grown - in a couple of months.
Don't buy planes but lease them. Restart your company and lease. I don't know which server you are playing but I would recommend you not to start in Europe or the US or China. Find a smaller country which is free (no competitors) and start there slowly. You might be able to buy planes after your company has grown - in a couple of months.
I badly expressed, sorry. I just leased that CRJ.
I am on ELLINIKON server and my HQ is in Czech republic.
You only have 1 plane on lease. You should have at least 4-5 used planes in the beginning.
And again - do not start in Europe or the US or China. It is too hard.
In your HUB, slots are still there but you have a competitor who is already big player, well connected (look at his Interlining partners) and it seems a good strategy.
To answer your question: it takes time to fill your planes. You need
- good strategy and connections
- better service and cabin configuration than your competitors and
- time to wait - it takes 3 days to really know how many PAX will fly on your flights.
The main problem with your airline is your aircraft utilization. You cannot nearly earn the weekly leasing cost with barely one short-haul flight per day. Your planes need to fly to earn money!
The main problem with your airline is your aircraft utilization. You cannot nearly earn the weekly leasing cost with barely one short-haul flight per day. Your planes need to fly to earn money!
They fly - the route from Helsinki to Prague is just an example. But even if they fly and even if i would fill up every seat in plane then i still be in loss (around -5000AS$ per fly because of TAXes)
Or "Costs of Capacity" TAXes are paied weekly instead of for every single flight?
Yes. leasing is paid weekly. And if you do not have enough weekly flights scheduled for your aircraft you won't come close to a break-even. Simply because 16 weekly flights don't give you enough revenues to pay the leasing costs. That's what you see in your cost sheet. Btw, what does your CRJ do to from monday to tuesday?
Looking into your flight plan, I also only can see flights Friday, Saturday and Sunday. Did you activate your flight plan after you have scheduled new flights? And why do you still only lease one plane? As Khan2 was saying: you only can earn money with planes in the air. With one plane you will not be able to grow.
You are currently paying over 8000 AS$ in prorated leasing for that flight. As per AET, with good aircraft utilization the leasing cost is about 2500 AS$ per flight on new CR7 on HEL-PRG. So you need to more than triple the aircraft utilization.
Also your fleet management cost for that flight is very very high (over 1500 AS$). You need to schedule more aircraft an flights so prorated cost of fleet management per flight goes down. For example, my fleet manageent cost on a 2 hour flight is AS$74 (on an A319).
Same goes for station cost - ramp agents, check in agents, etc. My average station cost is well under AS$190 per station yours is over $1500
So there you go ... 6000 + 1500 +1300 = 8800 AS$ that can be shaved off the prorated per-flight cost with increased utilization. You need to fly more aircraft and more flights per aircraft. Your maintenance ratio should be ideally very close to 100% without going below.
So your per flight cost (excluding variable cost) would be about 6900 instead of 12700 AS$
Now you can see, the flight can be profitable. That owuld make it a 66% load factor for break even point (excluding variable cost).
Indeed, no way even a brand new CRJ700 should cost almost $9000 in leasing expenses per flight! You need to increase the number of flights so that those costs are spread throughout several flights, therefore the per-flight costs will be cheaper.
According to the evaluation tool, that plane can fly from HEL-PRG at least 50 times per week, but you can probably squeeze the maintenace gaps even more to get about 8 flights a day (4 return flights), give or take. It then depends on whether you want to keep flying to the same destination several times a day or fly to as many different destinations as possible, or something in between.
And yes, more planes would also help to spread around costs like fleet management, making the per-flight costs again cheaper.
With a decent maintenance company your goal should be to keep your maintenance rate under 200%. Anything higher than that and it is hard to maintain profitability. I personally try to build a schedule with as many flights as possible while keeping the maintenance ratio over 100%. If I can get a full schedule and get to around 125% or so is always my goal.
Planes that aren't flying AND filling up to at least 80-85% are not profitable.
Also you do not actually pay the fixed cost portion until the end of the week. It is an approximation of your actual costs but you don't actually have cash expenditures at the time. A term you might look up is contribution margin. Just because one leg of your flight isn't profitable on its own it could still be adding to your overall profitability as long as it is covering the direct costs of the flight and eating into the fixed portion. You just can't have too many of these flights and stay afloat in the long run.
Better to be flying and break even than not to fly and not cover fixed costs.
As an addedum: I frequently will have "feeder" routes in small planes with 60-70% loads but still manage margins around 20% because of pricing. On a lot of these routes I am frequently unopposed because I'm flying into really small airports that others will frequently ignore. Mind you I'm using PC12's and Let 410's but because I'm the only show in town I can frequently charge higher prices. I also build try to build a hub into a smaller airport (size 6-7-8) for these feeder routes because they tend to be slot hogs...and a size 7 airport usually has slots to give whereas a size 9-10 airport does not. Ask folks how much they hate someone flying Let's into a size 10 airport. Usually it makes sense to fly somewhere else (cheaper) and then connect these passengers to the bigger hubs.
Plus Canada has a ton of these 1-2 bar airports that if you ignore means you ignore 80% of the airports in the country.
I also think smaller airports are better for a hub: not only is there less competition but you benefit from shorter connection times and shorter turnaround times, which for large airplanes can make quite a difference in your wave structure. You may struggle a bit in the first few weeks due to low direct demand, but that's offset by low competition, and once your connections are set up it really doesn't matter how big your airport is so long as you provide decent connections.
