11 Responses

  1. CanesLawMarty
    CanesLawMarty at |

    Interesting, especially when juxtaposed with AA’s earnings call comments the other day when they said they’re adding seats to the 738’s, to either 162 or 164, while retaining MCE, but using slimmer seats. I suppose with an extra dozen or so seats, they feel they can absorb the additional FA cost and still increase revenue. Only time will tell, I suppose.

  2. HansGolden
    HansGolden at |

    One of my favorites is the idea that the last seat sold on the plane represents the profits. The general theory is that cheapest fares show up right when the schedules open and then tickets get more expensive over time until the day of departure where walk-up fares are sky-high to take advantage of business travelers with inflexible schedules. And those last seats sold are where the profits from operating the flight come from. Except that the pricing trend described has not actually been true for 20+ years now.

    The fare that you’re getting for that last 6-12 seats is a fraction of the average fare; you’re chasing the low fare there.

    You’re confusing terms here. Mr. Hayes is not saying that the last seats sold are lower than average fare, he’s saying seats added are added to the front end of inventory, in the sense that the added seats are available from the very beginning and will be sold at the cheap prices. Of course no one has ever argued that adding 10 seats means you can sell 10 more last minute, high price, full fare seats! That’s just a strawman.

    None of the words that Mr. Hayes spoke contradict the simple fact that the last seats sold on a flight usually have a far higher fare, thus far higher profit margin, than seats booked months in advance by leisure travelers. Perhaps there are some inaccuracies to the model you derisively disparaged in the portion I quoted of you above, but Mr. Hayes’ words do not contradict it.

  3. Copa
    Copa at |

    Why block seats when you can opt not to have them installed in the first place? Then you’re saving the weight of the seats and the need for the extra FA, and probably some negligible amount on the cost of the aircraft.

    1. Austin
      Austin at |

      Delta actually did this at one point several years ago (I don’t remember which narrowbody model, but I think it was the 738). They didn’t want to change the pitch of the remaining seats, or move the pax service units, so they just took out two rows of seats, leaving a small section in the back of the aircraft where the seats were missing. It definitely looked weird.

  4. Austin
    Austin at |

    First off, when I was an RM analyst, I did keep a Magic 8 Ball on my desk, so you’re not too far from the truth… 🙂

    That being said, I think you’re using two different definitions of the “last seat sold,” which is confusing the issue. One definition is based on time, and the other is based on fare. The literal last seat sold, the seat sold to a passenger close to departure, is indeed generally the most profitable seat on that flight, since it was likely sold at the highest fare. However, adding seats to an aircraft doesn’t give you any more “last seats” to sell as the highest fare. The “last seats” on a larger aircraft, looking at them from highest fare to lowest fare, are indeed sold at the lowest fare.

    Think of it this way. There are a limited number of passengers willing to pay a high fare for a flight, but lots willing to pay a low fare. The goal of revenue management is to save just enough seats for those willing to pay higher fares, and sell the remaining seats to those willing to pay the lower fare. Adding seats to the plane doesn’t increase the number of people willing to pay the high fare, so you end up filling the extra seats with low fare passengers.

    An example: for a given flight, you have 10 people willing to pay $100, 20 willing to pay $50, and 100 willing to pay $10. If I have an aircraft with 50 seats, I want to sell 10 $100 seats to all of the $100 people, 20 $50 seats to all of the $50 people, and 20 $10 seats to a subset of the $10 people. If I increase the size of the aircraft to 75 seats, I am simply selling the additional 25 seats at $10 each to more of the $10 people. This is was was meant on the JetBlue earnings call when they were talking about the below-average revenue associated with adding seats.

  5. ShoNuffHarlem
    ShoNuffHarlem at |

    Great post. I think your missing one other thing specific to JetBlue. They have a large customer base that exclusively seeks them out, or at least high priority. They aren’t a discounter anymore for sure. One reason is their seat pitch.. They are for sure the anti Spirit. With IFE being added anywhere, this is a huge differentiator and if JetBlue added a few more seats, for only a little extra money after stewardesses, the risk of damaging the brand may end up being a money loser. Requires overall brand value thinking rather than strict revenue management bean counting, which JetBlue has always been strong in (the former).