Suggestion from very experienced player(s) needed

English Boards General
1

I am playing on Fornebu, and with Agex at very low 750 I am facing a demand issue on many secondary routes.

We are operating out of slot-congested airports.

My competitor took the easy way out and actually upgraded aircraft (the whole fleet) to bigger ones with much bigger & luxurious seats, thus converting loss-making flights into quite profitable ones. While reducing pax flow, it actually allowed him to increase profits. I have made conversion on some planes myself, especially the ones that exclusively served under-performing routes, and with the conversion they became profitable again.

My problem comes that in the beginning when I set up my airline, as quite a newbie I made a major mistake: I scheduled trunk routes along with the smaller routes, on the same flight plan, to get close to the 100% maintenance ratio. With AGEX at 1000 at that time, it was not a problem, as all routes were running fine. Now with AGEX at 750, while the trunk routes are still quite full with Leisure seats, many of the smaller routes are now at measly 30-40% load factor, which makes them loss-making with Leisure seats and a required 85% price ratio (to maintain 99 ORS rating).

Currently, I am flying all those routes (have not cut any yet) given the fact that I am still the most profitable airline in the country. But operating out of two slot congested hubs, this creates a major headache and problem for me: I cannot easily move flights to smaller planes, or to a different plane of the same size to then make conversion to bigger seats on that other plane. Basically, there is huge flight time overlap on all routes, and so far the planes where I have been able to mix & match give me a maintenance ratio of about 250-300% and some times even more, so not good at all. Slot congestion means I cannot move flight times.

This is the point where I solicit advise from experienced players who have lived through low AGEX.

Should I just stay put and keep those loss-making flights? (I do not like reducing transfer pax flow anyway by dropping flights?)

Should I upgrade to bigger seats? (While this will make loss-making flights profitable again, this will reduce pax flow on trunk routes, and I cannot put additional flights on trunk routes to make up for the trunk route transfer flow loss because of slot congestion ... even while this is the option my competitor took).

Should I try to mix&match schedules on smaller planes for the loss-making flights even if that means high maintenance ratio? This would also mean leasing out new planes, and leaving gaps on original planes, thus making the original planes less profitable, and having high maintenance ratio on both new and original planes, because of gaps in both flight plans).

Or can you suggest a way to actually move around schedules and not leaving gaps behind?

I can survive AGEX for quite some time, I have a huge cash reserve and I am still the most profitable airline in my country, BUT, I want to "DO" something about those unprofitable routes.

Thank you for reading this, and another thank you if you can give me some advise.

2

My competitor took the easy way out and actually upgraded aircraft (the whole fleet) to bigger ones with much bigger & luxurious seats, thus converting loss-making flights into quite profitable ones. While reducing pax flow, it actually allowed him to increase profits. I have made conversion on some planes myself, especially the ones that exclusively served under-performing routes, and with the conversion they became profitable again.

A strategy that is more and more used across Fornebu and kind of an outcome of the earlier seat- and floor-updates.

My problem comes that in the beginning when I set up my airline, as quite a newbie I made a major mistake: I scheduled trunk routes along with the smaller routes, on the same flight plan, to get close to the 100% maintenance ratio. With AGEX at 1000 at that time, it was not a problem, as all routes were running fine. Now with AGEX at 750, while the trunk routes are still quite full with Leisure seats, many of the smaller routes are now at measly 30-40% load factor, which makes them loss-making with Leisure seats and a required 85% price ratio (to maintain 99 ORS rating).

I actually don't have that experience with smaller routes. For many I've adjusted prices on an 80 to 85% level. While demand rebounced only for some, the rest is still mostly profitable on a low level.

In short words, there are several strategies with different advantages and disadvantages.

You've mentioned, that downsizing by changing aircrafts is nearly impossible. Depending on the flightplans and slots that's true. The strategy to improve seats, thereby increasing quality and price level and reducing volume without loosing slots, is worth a thought. While I am not a big fan of this strategy, it's worth a thought. True you will loose some pax on the higher volume routes, but those will get more profitable as well. Maybe you can change seats only for some routes, thus reducing the gap between your connections and the ones of your competitor.

The mix&match strategy looks a bit to expensive. I doubt, that this would lead to more profitability.

AGEX at current level is not easy. So a viable strategy still might be, to keep to your former strategy and refine it. So decide which route is worth to keep for a later higher level and which route can be dropped. Adjust prices not only for the inferior routes, but also selectively for the trunk routes, as this might create more transfer pax. And last but not least, depending on the market and it's competition, this crises will cause losses.  If you can make it through the crises, I think you should accept some losses and replace flight plans very selectively.

Sorry, all that might be not much help. It's my view on that situation. Basically the mistakes of the past (which are present for some of my airlines as well) are not that easy to wipe out.

3

:) Thank you

4

Hi George,

I would look for individual (per flight plan) solutions.

In some cases changing the cabin config may be the best - and most profitable - solution.

You may be able to replace an empty flight by another destination that still has reasonable seat loads (put the original destination in the remarks field so you remember to re-install that flight/route later on).

Like everybody else, I try to keep my maintenance ratio low. But ratio's well above 200 do not mean that a plane won't make profit anymore. It will make less profit, which is still a lot better than loosing money  ;-)

Scheduling is always an exercise in balancing maintenance ratio and connecting flight waves. I often sacrifice a low maintenance ratio if I can create good connections.

And if you are sitting on a pile of money, you're safe anyway. But I invest surplus money in owned planes. Owned planes allowed me to go on holiday last summer without worrying about an AGEX that flirted with the cape of 700.

Jan

5

Upgrading the seats actually helps. Before the changes in cabin configurations, I had been using "economy" seats for my secondary routes. When AGEX dropped, my seat load factors dropped too. Then I switched to the Ecoplus and all my flights were full again. So currently, I use Comfort Plus for all my short-haul routes. Yes, I carry less passengers, but I can charge at least 30% more and make decent profits on each flights. If the demand is low and you're getting 50% SLF, if you change them to Comfort or Comfort Plus, it'll be 80% full (I'm just guessing), but still be profitable because you can charge more. You should check the difference in ratings between Leisure seats and Comfort seats.  Finding ways to get higher ratings will also get you more passengers too.