How profitable are ultra-long-haul routes? Pioneering research gives answers
Ultra-long-haul flights over the past decade have been typically famous for two things: unparalleled public attention and extreme vulnerability to internal and external factors. At an event at BA’s head office on 09 January, Linus Benjamin Bauer, consultant and ex-market development manager at Etihad Airways, Singapore Airlines, and Skywork, presented the numbers from Qantas’ direct Perth – London flight.
Qantas Perth – London passes 12/20 top hubs; premium demand crucial
The nature of Perth – London is that it passes all the major hubs which have grown out of connecting east with west. These include Singapore, Dubai, Doha, and Abu Dhabi. Price-led economy passengers are likely to opt for such one-stop service, Bauer explained, with fares typically 48% lower than the direct Perth – London flight between March and September 2018. For higher-yielding business travellers, time is money, and this is reflected in the 78% premium for business class to travel direct.
Fuel burn for direct route 30% higher than one-stop service; cabin mix vital for yields
On ultra-long-haul flights, a key issue is having to carry the equivalent fuel for two flights. Therefore, for the first half of such a flight, fuel burn is extremely high as the aircraft burns additional fuel just to carry the uplifted fuel load. To counter this, Bauer explained the need for a large three or four class cabin to boost fare performance. Singapore Airlines, with a two-class cabin, have struggled on Singapore – Newark as premium customers choosing business class/no price-leading economy cabin causes poor premium economy loads.
London – Perth profitable for now but just 2% net margin
Ultimately, Qantas is not immune to external factors, and ultra long haul routes are extremely vulnerable to this. Fuel is 64% of all costs on LHR-PER, leading to a 2% net margin between April-September 2018, with a load factor of 82%. Breakeven load factor (BELF) is 79.8%, around 16% higher than an equivalent one stop.
Therefore, even a small fuel price increase would throw this into a loss. Indeed, the current situation in Iran is requiring a 50-minute longer routing and a 90-seat payload restriction – over a third of total capacity. If the crisis continues, it seems unlikely the route will survive long-term. Perhaps the intended A350-1000 for Project Sunrise could be the answer, with greater range and passenger capacity with minimal increased fuel burn?