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Air North News

Taking the Mystery out of Air Fares - Web Message


November 2009

While I have been getting plenty of positive feedback concerning the content of the President's message in our magazine, I do not want to run the risk of losing the interest of our readers by devoting another message to continued discussion about the economy, the airline industry, and the competitive landscape. Not much has changed on any of those fronts and we continue to look to Yukoners to support their airline in order to ensure its continued success. I am pleased to report that we have managed to remain profitable to date this year in what has been a very difficult environment. Our performance remains well above industry average. We have in the past, and will in the future rely on great local market support and this is a good time to once again, say thanks to our loyal customers, employees, and shareholders.

We know that our local market support could evaporate pretty quickly if we do not continue to provide a top quality, competitive product. It is a buyers market and there are plenty of good travel deals available right now but we remain committed to making sure that travel costs to, from, and within the Yukon are competitive with those in other parts of the country. In order to do this, we have, since early 2009, been conducting an ongoing industry airfare survey, and as airfares seem to be of interest to almost everyone, I thought that our readers might like to see the data that we have collected.

In our survey, each week we sample "best fares" from carrier web data for travel three days out and thirty days out in nineteen different Canadian markets. All routes are served with jet equipment by at least one of the competitors. Fare data is presented for each route along with market size (airport traffic data) for the smallest market, carrier, and route distance in statute miles. Best three day and thirty day fares are shown along with the average of the two figures. Data is converted to travel cost per mile in order to better compare costs for routes of different lengths. Survey data has been summarized to show Air North fare data in comparison with overall average data, competitive data for the Vancouver-Whitehorse market, and average data for short (less than 600 mi) routes, medium (600 mi-1200 mi) routes, and long (greater than 1200 mi) routes. Cumulative average survey data for the period from June 26, 2009 to October 21, 2009 is shown in the PDF provided below.

Air North, Yukon's Airline Best Fare Survey 2009 - Weekly Data June 26-Oct 21

The airfare survey is interesting and useful because it allows us to compare our pricing with pricing in other markets. The data shows that our pricing compares very well with pricing in other similar markets and it also illustrates the difference in travel costs between long routes and short routes. This discussion would not be complete without at least a quick explanation of these variances in yield.

Longer routes are less expensive to fly, on a cost/mi basis, than shorter routes, primarily because there are significant costs associated with the take-off and landing phase of flight. Airline costs may be allocated between fixed costs, or overheads, and variable costs, which are costs incurred as a result of operating aircraft. Variable costs may be further subdivided into what might be called "departure costs" and what might be called "en-route costs". Costs associated with departures would include check-in, baggage handling, airport fees, de-icing, maintenance cyclical costs, take-off and climb fuel burn, and other such costs. En-route costs would include cruise fuel, maintenance hourly costs, and flight crew hourly wages. Departure related costs of $4000 would amount to $50/passenger on a flight with 80 passengers. This would amount to $.25/mi on a 200 mi route; $.05/mi on a 1000 mi route; and $.02/mi on a 2500 mi route, so it is easy to see how departure related costs can account for significant differences in per mile travel costs between long and short routes. Taking this approach one step further, if we take the overall average fares of $134, $178, and $265 for short, medium, and long routes, and if we assume an average mileage of 500, 1000, and 2000 miles for short, medium, and long routes, then with a little algebra we can arrive at a fare formula of $90 plus $.09/mi which will get you in the ballpark with respect to air fares on any of the routes in the survey.

Other factors that impact fares are aircraft size and load factors. Generally the cross-country routes serve the largest markets, so they typically utilize larger aircraft and enjoy better load factors and this has a direct impact on fares. To illustrate, a carrier flying a 150 seat aircraft at a cost of $.12/asm with an 80% load factor will need to price at $.15/mi to break even while a carrier flying a 100 seat aircraft at a cost of $.18/asm with a 70% load factor will have to price at $.26/mi to break even.

I hope that readers have found the data collected in our best fare survey and the discussion about airfares to be interesting. More importantly, I hope that this discussion demonstrates our continuing commitment to providing a good product at a fair price in the Yukon market.

Joseph Sparling, President
Air North, Yukon's Airline

 
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