- Jan 14, 2009
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Many thanks for that explanation, Starflyer.To answer Jerry's question, I do have the Flybe yield and volume data by route. I'll need to leave you to your own conclusions on who I might be or how I might have that, I'm afraid. Cardiff Airport also has it for the routes that were covered by Project Red Kite, but I'd be very surprised if they have the comparators for the routes like those at Exeter or Birmingham to show whether the Cardiff performance was better, worse or in line with the average.
As I've said - the Exeter Flybe yields were quite a bit higher than Cardiff on pretty much every route apart from Belfast. There were quite a lot of routes where efforts to squeeze up yields simply resulted in a big drop in passenger volumes and Cardiff was amongst that group (DSA routes were generally much the same). The argument of "fly a small aircraft and you can push the fares up" doesn't work in these markets given the price sensitivity and easy interchangeability for customers of using alternatives at the likes of BRS (for CWL) and EMA (for DSA).
You perhaps go from carrying 40,000 passengers at £60 average fare (so £2.4m revenue per year) to 18,000 passengers at £80 average fare (so £1.44m). £2.4m isn't enough to sustain a daily Q400 service and £1.44m isn't enough to sustain a daily Embraer 145 service, and the 33% increase in average fare leads to a 55% drop in passenger numbers. If the relationship between the increase in fares and the drop in passenger volumes was linear, you'd stand a chance - but it is not. I'm struggling to explain this any better, but that's the problem here.
If, say, some of the CWL domestic routes became APD-free, either because they were desinated PSO or the Welsh Government was given the power and abolished the tax, in your example of 40,000 @ £60 average fare that produces £2.4 million would effectively give the airline an extra £520,000 if they kept fares the same and retained the £13 pp APD equivalent. Would that in itself be enough to sustain the route?
PSO flights are APD-free in both directions so far as I'm aware but a general abolition of APD by the WG would only apply to outbound flights from CWL (unless they were PSO) unless the reciprocal flights also became APD-free in some way. There is also the fact that under 16s don't pay APD anyway on the lowest class of seat but I'm guessing that this type of passenger is not a large proportion of the customers on domestic flights.
In general terms, if an airline suddenly found a route that it had been operating became APD-free would it be likely to keep fares much as they were and retain the APD tax element of the 'fare' that formerly went to government, or reduce the fares a bit and keep a smaller proportion of the APD-equivalent in the hope of attracting more passengers, or reduce the fares completely in line with the APD that was 'saved' again in the hope of attracting more passengers?
My feeling is that a combination of these things might be tried depending on the type of route and airline concerned. In this I'm not just thinking of airlines with smaller aircraft on mainly domestic routes.
Thank you for your input which I find extremely informative.