Delta admits they now schedule routes based on how it’ll help sell credit cards. That requires a very different understanding of route profitability and how you attribute (card) revenue to flights.
United’s Scott Kirby lamented the airline’s leaving New York JFK even though they believed those JFK flights were unprofitable.
- They lost corporate contracts on the West Coast
- Turns out, those companies didn’t want to fly into Newark
They were doing the math on those JFK flights wrong, failing to attribute revenue from the overall corporate deal to those flights. The flights looked like losers. They weren’t – even though ticket revenue for passngers onboard didn’t cover costs. Other flights under the deals weren’t as good as they looked either, effectively subsidized by that JFK service.
I had an argument years ago with Ben Baldanza over 6 a.m. Monday morning flights… he said corporate deals were money losers because you had to operate those flights to business destinations that didn’t fill up. But that meant either
- the corporate deal is unprofitable (don’t do it) or
- it isn’t and you are doing the accounting wrong if it looks profitable overall, but some flights you have to run to get the deal aren’t.
Some flights look better than they really are – the ones with the ticket sales – while others look worse, the ones you have to run to get those sales on other flights in the first place. A given deal may or may not make sense but you have to attribute revenue correctly and that is a problem across companies throughout the economy. It is even a problem measuring the economy itself. Build bombs and drop them on people and GDP goes up..!
But you get decisions based on what (and how) you measure, and traditional measures can mislead. Decisions to make money need to start with what products your customers want (and are will pay for, but pay for can take many forms).
If a customer will pay for the option on a flight it doesn’t matter if the flight is empty if the option is expensive enough!
You can run empty flights to a dream destination and if the idea that a customer might redeem there later and that drives card spend (consumer revenue-enhancing behavior now) the flight could actually be profitable.
Delta serves customers by (1) moving them from place to place, (2) by offering them the future option of flying place to place, and (3) the subjective consumption that they participate in an activity that gives them the future option to do so.
All of those are products they are producing and selling and traditional accounting only picks up the first and fails to value the second and third.
I have had this bugaboo for more than 20 years as regular readers know. Somehow it seems like some airline executives finally think along these same lines! It’s important, because how you measure a flight’s profitabiltiy drives network decisions and brand decisions and product decisions as well.
All probably because Newark is a sh!thole.
I love how for decades Continental and United and I’ll assume others try to put the corporate spin on Newark as if one is really flying into New York.Dishonest
I avoid Newark at all costs based on end experience.Perhaps if they collapse and rebuild these antiquated terminals it could work.As well as manage traffic flow in and out of the airport.@ present a complete failure.Then add the airport traffic control operators shortage situation.Downright scary
One of the worst airports I can think of in every regard.Happily spend more to avoid
Cost accounting and revenue accounting are complex and fascinating topics. So many executives make their lives much harder by not making sure they get the right data.
Ah, a VFTW classic… hyperbole. There are no ’empty’ flights, Gary. Some may have a few open seats, but it’s nothing like your title suggests. As to the bigger picture, yeah, the game has changed, these are no longer logistics companies, and modern commercial airlines are indeed ‘credit cards with wings,’ in no small part due to the relatively unregulated ‘corporate pseudo-currencies’ (points, miles, status), which arguably was a precursor to proliferation of both ‘crypto’ and the ‘attention’ economy; yet, now, we’re going to collide all of this with the ‘AI-bubble’ (for better and worse, already Google will ‘advise’ you where to travel if you ask it), so who knows why or where these companies decide to fly. Like, United just renewed Nuuk for another year, so clearly, it’s not just about reliability or actually making any money… *facepalm*
Of course, someone like @Craig Jones had to go there… and, now, I have to defend New Jersey. Ugh. EWR has come a long way since opening Terminal A (which, like the new LGA, is incredible) as well as United updating its Terminal C standard United Clubs (both quite nice these days). Sure, Newark, the city, isn’t really a destination (unless you like the NJ Devils or seeing a show at the Prudential Center, or delicious Portuguese food in the Ironbound, or more affordable rent, with any connection on the PATH or NJ Transit or Amtrak to NYC and all along the NE corridor). So, no, neither EWR nor the city, is as doofus Craig says. Besides, wasn’t our President calling other countries that silly name… Huh, and His Bedminster golf course is so near by. We wouldn’t want upset our Dear Leader, would we…
I think it’s safe to say that one of the reasons that AA typically loses money or claims nominal profitability, is because they have taken a hatchet to flights from NY to the west coast and NY to Florida, plus the constant chopping of traffic through Chicago. Stellar traffic on flights from El Paso to DFW will never turn this company into a money maker.
@Joseph — If only those MBA-types would include a few more ‘buzzwords’ in their decks. For instance, let’s circle back on our deep dive about this paradigm shift to disrupt bespoke, curated, sustainable, organic synergy within our core competency!
Constant devaluation of points and constant increase of credit card annual fees seem likely to reach a point where neither works for consumers. And it takes only one woke Congress to regulate the points business out of existence.
Gary is right that airlines do have to allocate revenue from all sources to their specific routes but no airline gets enough revenue from non-transportation sources to cover airline losses.
Let’s remember that AA gets a less than 2% profit margin on almost $60 billion in revenue; DL gets more revenue from its credit card and other ancillary sources – including its MRO – than any other airline in the world so, yes, DL can do more developmental flying supported by its credit card and ancillary revenues.
AA simply does not run a core airline that is anywhere near as profitable as DL so the notion that AA isn’t accounting for its NYC revenue probably misses the whole boat which is profitability of the entire airline.
as for NYC, as much as CO and UA want to believe otherwise, LGA is the preferred and largest airport of the 3 NYC airports for destinations inside the LGA perimeter while JFK is for destinations outside of the LGA perimeter, including international.
UA believe/d that they could do it all at EWR but miss the fact that the majority of either the shorthaul domestic or longhaul domestic and international market flies out of LGA and JFK, both DL hubs.
And EWR was never built for the volume it handles which is why the FAA has finally forced UA to reduce the amount of flights there, despite the fact that UA and CO have operated over 60% of EWR’s flights for decades.
DL simply has led the industry in building a sustainable business model while UA is trying to follow DL – and has the best success of any of the other US airlines -while AA and the LCCs are all floundering, credit card deals or not.
Ah – thank goodness! I’ve missed Fan-Boy Tim’s Delta love for a few days… glad he’s back in fine form!
TIMMY!
Kirby is often right, but on JFK he is wrong. United flights from JFK to a handful of destinations won’t add much to its share of NY corporate travel.
@Kirk — Ah, yes, the strawman that any regulation is automatically bad… No, sir. The railroad has already come to town. The wild west is over. When the adults are back in-charge, it’s time to get some reasonable rules on the books, and enforce them (so that we don’t devalue everything into oblivion). For instance, let’s do the equivalent of putting up a sign: ‘no weapons in the saloon.’ Barkeep gets to keep his though; can’t be havin’ shootouts… it’s a place of business, darn tootin’!
@T Car — For JFK, with what Star Alliance members are planning at the new Terminal 6/7 and United’s supposed ‘deal with jetBlue,’ maybe they’ll get their slots by like 2027. (Don’t worry, @Tim Dunn, it’ll take a while for them to even try again. Oh, remember during the pandemic… oof, @Max Power, sorry, but that was awful timing on those JFK-SFO/LAX routes with the 757.)
If this were written to be more clear, it probably would have been interesting.
A lot of people like to put down EWR but I flew through it a number of times and didn’t find it that bad. I could also see the twin towers from it, which I don’t believe could be seen from a terminal at any of the other New York City airports. Of course, later views didn’t have the twin towers and that was a reminder of the hate.
T car is right.
UA thinks it is going to come into a market with a handful of flights to a couple of cities and make a difference in a market where 3 carriers have much larger operations.
None of those 3 carriers are going to cede a single high revenue passenger to UA including B6 that will not and cannot have a revenue sharing agreement with UA.
@jns–FYI, while the twin towers of the World Trade Center stood, they could also be seen from JFK, at least on a clear day. EWR is much closer to that part of Manhattan, though.
@Tim Dunn–I agree that LGA is generally viewed as the preferred NYC airport within its perimeter rule area. Its flight paths, generally up and down the Hudson River, also offer the best views of Manhattan on approach or takeoff–just try to avoid losing both engines to bird strikes.
@dwonderment–I completely disagree with your opinion that EWR should not be marketed as New York. I think it was silly to remove EWR from the NYC airport search code–it is physically closer to Lower Manhattan, especially the FiDi, than either JFK or LGA. My issue with EWR is more about ground transportation to the city after landing. If taking a taxi, the fares are metered and not flat rate as they are from JFK. Tolls, using either the Lincoln or Holland tunnel are expensive plus cabbies tend to use the NJ Turnpike to get to and from the tunnels, which adds to the cost. The train from the EWR station to Penn Station in Manhattan isn’t horrible if you use NJ Transit but can cost a lot more if you use Amtrak and either way, you have to get a cab, subway, etc., to finish your trip. All of that is why I generally use JFK (I live very much outside the LGA perimeter).
So Fatty writes an article with no actual facts and then Spectrum Boy comes in as expected for the Klan airline in Atlanta. Bravi uomini bravi!
The idiotic EWR does not serve NYC argument would be like saying Cincinnati does not have a commercial airport or Burbank does not serve L.A. Just feckless nonsense as usual. With Spectrum’s opinions presented as facts. Another great day for Dunning-Krueger.
@Steve from Seattle — I like your comments, and wanted to add: Until September 11, 2001, you could see the Twin Towers in the horizon, the Concorde, and the old Terminal 3 PanAm ‘Flying Saucer’ Worldport, all at JFK. Now you’re making me nostalgic.
While EWR is ‘closer’ by distance to Manhattan than JFK, the traffic on the Pulaski Skyway and getting into the Holland Tunnel, or the Lincoln Tunnel, or the GW Bridge, can ‘take longer’ at times. On super busy days, in addition to the options you described (NJ Transit, Amtrak), I actually like taking the bus or an Uber to Newark Penn Station, then the PATH to WTC; sometimes faster, and definitely less expensive than rideshare/taxi. PANYNJ is working on a EWR AirTrain extension to Newark Penn Station, which would be huge. And, yes, LGA and JFK are technically closer to NYC, because, well, they’re literally ‘in’ NYC (Queens), but, most people only think of Manhattan (Midtown, Downtown) as ‘NYC’ it seems. *sigh*
As a Manhattanite, I’m with you, I do ‘prefer’ LGA, specifically for its proximity to Manhattan and likely flight-paths (I do ‘roll the dice’ but as a passenger I’d typically pick ‘left’ side, window, in hopes of the Runway 31 landing sequence; but, if it’s Runway 22, you’d want the ‘right’ side. You win some, you lose some.) However, generally, as to ‘preferred’ airports, it totally depends where you’re coming from or going to. If you’re flying from SEA, you only get EWR or JFK, as you are already well-aware. Other than eastern Canada, not many international flights from LGA either.
Another problem with EWR is that there is no dependable handicap accessible way to get into Manhattan, other than car service ($$$). Some moron decided that a non-handicap friendly bus to the Airtrain was acceptable from Terminals A and B, or a 20 minute wheelchair with a $20 tip.
@Jim LeJeune–your comments about “EWR does not serve NYC” are spot on. And if you have tons of money and fly private, Teterboro definitely serves NYC, too!
@1990–thanks for your kind comments. I have never lived in NYC but I have a friend in Jackson Heights who says I am a “New Yorker who just happens to live elsewhere,” which I took as high praise. You are definitely right about which airport works best being highly dependent upon where you are going/coming from. Staten Island, for instance, is very close to EWR.
An EWR Air Train to Newark Penn Station would indeed be a game changer. I have never thought about a bus to the PATH station, either. All good ideas if I ever use EWR to go to Manhattan.
As for being nostalgic for the WTC, I had planned a NYC trip in July, 2001, to visit in December of that year. In-between, of course, 9/11 happened. We decided to visit anyway, (a) because we wanted to and (b) we felt it would be unpatriotic to cancel. So, I saw the still-smoldering ruins less than 3 months after the attack. I have always found New Yorkers to be friendly but on that trip, when people found out how far we had traveled, we heard “thank you for coming to New York” a lot. I remember going to the late great Carnegie Deli on a Sunday morning, where the owner led the entire room in singing “God Bless America.”
There were a couple of hidden “casualties” of the 9/11 attack that year. One was the 2001 Seattle Mariners, whose regular season record that year I don’t think has been topped since. They got through the All-Star break and the loss of Ken Griffey, Jr., for most of the year but didn’t survive the 9/11 “break.”. When they came up against the Yankees in the playoffs, the entire world was behind NYC and the Yankees. So, this year, Go Ms–they are the only MLB team never to have made it to the World Series. Hopefully, that ends in 2025.
The other “casualty” was an episode of The Simpsons that was one of the best and funniest I ever saw. Homer ends up at the World Trade Center. If you ever visited the observation deck, this episode would be especially funny, but I doubt it will ever see the light of day again because it could now be considered disrespectful.
Ah, too much nostalgia.
JFK – Under construction – Might be amazing 5 years from now. Yesterday’s arrival was a typical JFK arrival: Plane lands 55 mins early…Beautiful. Wait on the ground for 45 mins for gate into T4…ugh! Clear customs quickly, probably the most professional out there. Wait for a Bus to uber point, as they’re no longer allowed near many terminals. Meet many homeless people asking for a credit card to book an uber for me. No protection from wind whatsoever, going to be fun in January. Book uber, which comes in a timely manner. Train from JFK to Jamaica/Penn/GCT works.
EWR – Also under construction, but limited to 2.5 runways, with construction on runways happening too…- Terminal A is nice, but getting anywhere but to its own parking lot involves a bus to a train. Terminal C isn’t evil, but it’s ugly. Not as ugly as Term B…Which in EWR is the international terminal. Why out of towners hate EWR? You would too if you have to change terminals there. Train service from Penn to EWR works.
LGA – Nice New Terminal to wait out your extensive delays for <1500 mile flights. Runways still cross either other, making it the first airport in the area to have delays when the weather sucks.
Other than a few buses, no mass transit links to LGA.
If you live on Long Island, you're never going to Newark. If you live in NJ, you're probably avoiding JFK/LGA. If you live in Manhattan you're probably voting your desired carrier or wallet.
Mass transit/cabs work to all of them, and only suburb dwellers drive their own cars to the airport.
@Steve from Seattle — Very kind words, sir. Thank you. And since both NYC teams are out, why not, I’ll root for the Mariners this year (sorry, other to Steve (M.), who I believe is from Toronto.) And, 100%, The City of New York vs. Homer Simpson, S9, E1, 1997, is literally my favorite episode of that show. I still enjoyed the bit with the guys yelling between the towers (shatap tha botha yas!) and, even that call Homer makes to the ‘parking violations bureau’ (Parking Officer Steve… how ironic!) Sadly, I never had the chance to visit the original WTC. These days, I live nearby, and have been up in the new One Word Trade Center many times; it’s excellent, and they’ve done a good job with the new towers 3, 4, and 7, as well as the Memorial and Museum, and the nearby St. Nicholas church. The city has come a long way, and we’ll never forget.
@DanG — For JFK, next time, if arriving at T1, T4, or T5, just take the AirTrain to T8, and you can get a regular Uber, no shuttle bus required. For EWR, it’s far better than it used to be, and there’s little chance they’ll ever add more runways there (they’d have to take out highways, the port, etc.) For LGA, oh, come on, to complain about that airport now is just ungrateful; it’s beautiful, all of it. Yes, those of us in Manhattan have our pick of all three main airports; Long Islanders can go to ISP, those in Westchester County can go to HPN, and those in NJ can also go to PHL, so everyone here has at least 3 airports, one way or another. You’re correct about suburbs and cars at least.