Profitability on larger jets

zosorock · **on:** February 05, 2008, 01:32:03 am

I was wondering if anyone else has issues profiting with large jets. I just did a test and a quick math and it doesn't seem possible to profit from a 747-200 lease, even if you get a 5% rate (around 20 million/month).

I tried to establish one round trip in a route that is 3,996nm long and the profit was something ridiculous like €72k because I had to charge peanuts to get the thing full. The route is a good route with a 1000/2000 demand and no competition.

Then I went with two 0.5 trips, one to this destination and the other even further (5273nm). I don't think it would be possible to fly these two route on a same day but, let's leave that aside for now. The result was a little better but the most the plane will make a day is €181,000. I make more than that in my Page Herald and it costs only 1/80th. With this plane daily profit the maximum revenue is 4.3 million/month and the lease costs 20 million. On this math is better to have 80 Page Herald operating than a single Boeing 747-200.

I believe is partially because, for some reason, even with no competition, I am forced to charge very little to fill up the plane. Did any of you find a way to profit with the larger jets? Is this a known issue that's being worked on and I am unaware of?

I appreciate any comments

epxair · **Reply #1 on:** February 05, 2008, 01:37:15 am

if you are smart enough to do the calculations....you will find the answer......

for me.....if not necessary.....i will only use 742 for routes that no other planes can reach to............

zosorock · **Reply #2 on:** February 05, 2008, 01:43:35 am

But don't you agree that if there is no competition and there is demand, you should not be forced to lower the price so much to fill up the plane?

I must be missing something in the picture but I honestly don't see it. I guess I am just too much of a n00b :oops:

zosorock · **Reply #3 on:** February 05, 2008, 01:53:54 am

Ok, just did a test with a Convair 990 on the same routes and it is still not profitable enough to pay for the lease. So basically one cannot lease larger aircraft, has to buy it to make long routes profitable and use lease only on short routes? Is that the key?

Thank you

dktc · **Reply #4 on:** February 05, 2008, 02:18:10 am

1. If you could charge 1800 max for a 8 seater on that route, charging 1800 with a large plane would still only get you 8 pax. Now 8 pax would be 100% for the 8 seater... but maybe... hmm 2%? in a large plane. Simple math you missed.

2. Some people find the lease rates agreeable to a degree for various reasons. It depends on the unique situation of every operation. It is a business you are running, and you should use your brain as such :wink:

zosorock · **Reply #5 on:** February 05, 2008, 02:24:26 am

Ah gotcha! thanks buddy!

Max2147 · **Reply #6 on:** February 05, 2008, 04:49:00 am

You're encountering the exact same problem that real-life airlines encountered when they first introduced the 747.

They were doing fine on routes with smaller aircraft, and they figured they'd be able to sell lots more tickets for the 747 without dropping fares that much. They were wrong. There simply wasn't enough demand to fill big fleets of 747s, and the airlines flying them started bleeding red ink. On a few select routes it did brilliantly well, but for most airlines the 747 was a financial disaster.

Back in the 1970's a lot of airlines bought a few 747s each. Pretty much any airline worth the air in their tires had to have one, and some went broke because of it. Eventually most of them were forced to get rid of their 747's because they simply couldn't fill it, and it was too expensive to fly around half-empty. Today most 747's are operated by a fairly select group of airlines who have a lot of them.

It's neat to see the same thing occurring in AM. Airlines think they have to have a 747, they spend vast amounts of money to get one, and then they find they can't make money with it.

SeaBlue Pacific Air · **Reply #7 on:** February 05, 2008, 05:53:46 am

I was thinking about the 747 for a long time already because this is the only plane that can fly from one of my biggest hubs to one of the biggest cities in another continent. I just can't push the buy button because the 747 won't make as much money as 10 Starliners.