Math behind Capacity Reduction

Let us consider flights between Los Angeles and New York.

Let us say we have –
First Case – No capacity cuts and low ticket price

• 10 aircrafts with 100 seat each = 1000 seats available
• Each seat is $100 (assuming one fare class for all)
• There are 1000 passengers that are willing to pay the price and fly.
• Airlines make – 100,000 – Cost of flying 10 aircrafts

Second Case – No capacity cuts and Higher ticket prices

• 10 aircrafts with 100 seat each = 1000 seats available
• Each seat is $150
• Now we only have 700 passengers willing to pay the price
• Airlines make – 105,000 – Cost of flying 10 aircrafts

Third Case – Capacity cuts and Higher ticket prices

• 7 aircrafts with 100 seat each =700 seats available
• Each seat is $150
• Same 700 passengers willing to fly
• Airlines make – 105,000 – Cost of flying 7 aircrafts

So, overall the airlines will fly fewer planes (hence no pay the cost of gas, workforce time, etc) and make same or more money (more is when the cost of flying a plane is more that a plane full of $100 a ticket passengers)

Disclaimer – I do admit that I have made it a little too simple and neglected the affect of different fare classes (which means you can buy a ticket from $100 to $1000), recession affect on passenger’s flying habits, etc.

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Continental’s Turn to Cut Capacity

After American Airlines and United Airlines announcements on capacity cuts, Continental has come up with its own announcement.

From Bloomberg –
“Continental Airlines Inc. will cut
3,000 jobs and shrink its jet fleet by 18 percent, becoming the
fourth major U.S. carrier to slash payrolls and flights as
soaring fuel prices push the industry to its worst losses since
Sept. 11.”

How it affects a Passenger?
The reason for American Airlines to initiate the capacity cuts was a way of starting an initiative that is expected to follow by other carriers to decrease the overall network capacity. Since the carriers did follow suit, it means that there will be lesser seats available on the network to fly. This in turn means that the airlines can raise ticket prices even more without weakening their demand.

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Pilots at US Airways: East vs West

First a little bit of a terminology as used at US Airways –
East Pilots/Employees – Pilots/Employees who worked for US Airways before the merger
West Pilots/Employees – Pilots/Employees who worked for America West before the merger
Though I think the terminology is used for all other work groups and even management staff as East vs West.

Back to current news –
The new union at US Airways called USAPA filed a law suit against some “West” pilots charging that they have engaged in “harassment, extortion, racketeering and other illegal activities.” The law suit also alleges denial of cockpit jump seat privileges to East pilots by West Pilots.

From ATWonline –

“The suit claims that a group of AWAPPA pilots named as defendants made
harassing and threatening phone calls to USAPA and its leaders and
deliberately jammed its toll-free number with thousands of “frivolous
calls.” In one instance cited, a doll labeled “USAPA” was found hanging
by a noose inside a US cockpit in St. Louis.“

“One pilot, a senior captain formerly with HP who spoke on condition of anonymity, told ATWOnline
that there continues to be “animosity at a lot of levels.” He claimed
there are some pilots with far less seniority who are upset and
frustrated over a lack of promotion opportunities. “The emotion
involved by those affected sometimes manifests itself in ways you may
not consider professional,” he said.“

Today, even the US Airways CEO Doug Parker has said “No” to executive intervention.
From ATWonline –

“”Doug has made it very clear throughout all of these issues that we would be neutral on this,” spokesperson Andrea Rader told ATWOnline”

Interestingly US Airways is the same airline that has actively pursued merger with Delta Airlines and then United Airlines, though they have not yet come clean with the initial merger of US Airways and America West.

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