In the past 15 years, various ultra long-haul routes were operated by airlines from different regions across the globe. Between 2004 and 2013, the majority of ultra long-haul routes were axed mainly due to the increase in jet fuel prices. Despite negative developments in the past, current airlines still operate or intend to operate ultra long-haul routes while other airlines and various experts highly question the feasibility of cost-intensive services.
Can ultra long-haul flights be profitable at all? Due to the lack of clear academic evidence, the author Linus Benjamin Bauer aims to enhance and update the current debate, whether ultra long-haul flights in general are either commercially viable or not.
Key findings from Bauer’s comprehensive analysis and developed revenue-cost model conclude that due to the improvement of fuel-efficient long-range aircraft such as the Boeing 787 Dreamliner and Airbus A350, ultra long-haul operations nowadays may prove to be resilient. The cost advantages of such cost-intensive operations may be slight compared to one-stop services. However, ultra long-haul routes are likely to make up for it in market positioning by targeting premium customer segments with lower price sensitivity, one of the main drivers of the profitability of the 21st century airline business.
Table of Contents
1.0 INTRODUCTION TO FINAL MSC PROJECT.
1.1. INTRODUCTION
1.2. DEFINITION OF ULTRA LONG-HAUL FLIGHTS
1.3. REVIEW OF PREVIOUS ULTRA LONG-HAUL OPERATIONS
1.3.1. Causes for the Suspension of Ultra Long-Haul Operations
2.0 CURRENT MARKET OVERVIEW OF ULTRA LONG-HAUL FLIGHTS
2.1. OVERVIEW OF CURRENT ULTRA LONG-HAUL ROUTES
2.2. OVERVIEW OF UNSERVED AND UNDERSERVED ROUTES
2.2.1. Unserved Ultra Long-Haul Routes
2.2.2. Underserved Ultra Long-Haul Routes
2.2.3. Unserved Routes with Operational Limitations
2.3. KEY INFLUENCING DRIVERS FOR THE LAUNCH OF ULTRA LONG-HAUL FLIGHTS
2.3.1. Economic Performance and Outlook of the Airline lndustry
2.3.2. Development of Jet Fuel Price
2.3.3. Development of a Fuel-Efficient Fleet
2.3.3.1. Deployment of Ultra Long-Range Aircraft Types
2.3.3.2. Rise of Unique City Pairs
2.3.4. Development of Global Wealth
2.3.4.1. Rise of Middle Class
2.3.4.2. Propensity to Travel
2.3.5. Development of Demand in Premium Travel
2.3.6. Yield Development in Premium Classes
2.3.7. lncreasing lmportance of the Premium Economy Class
2.3.8. Global Forecast 2016 – 2036
3.0 PERTH-LONDON MARKET ANALYSIS
3.1. OVERVIEW OF MARKETS
3.2. MAIN COMPETITORS
3.3. QANTAS’ STRATEGY AND ULH-BUSINESS MODEL
3.4. COMPOSITION OF TRAVEL
3.5. CUSTOMER ARCHETYPE
3.6. CUSTOMER-PERCEIVED VALUE
3.7. MARKET DEVELOPMENT PERTH-LONDON
3.7.1. Development of Total Amount of Passengers Carried 2015-2018
3.7.2. Market Share by Passengers Flown
3.7.3. Market Share by Premium Passengers Flown
3.8. NETWORK
3.8.1. Qantas’ Kangaroo Route Development 1947–2022
3.8.2. Rise of Mega-Hubs Along the Kangaroo Route
3.8.3. Share of Connecting Passengers
3.8.4. lnternational Traffic and Capacity Development 2008-2017
3.8.4.1. Scheduled lnternational Capacity Growth
3.8.4.2. lnternational Traffic and Capacity Development
3.8.4.3. Rise of Additional Seats in Winter 2018
3.8.5. Direct Flight versus 1-Stop Flights
3.8.5.1. Routings
3.8.6. Total Travel Time Comparison
3.8.7. Market Share by Capacity
3.8.8. Market Share by ASK
3.8.9. Feeder Traffic QF9/QF10
3.8.9.1. Feeder Traffic from/to Perth
3.8.9.2. Feeder Traffic from/to London-Heathrow
3.9.0. On-Time Performance Analysis.
3.9.1.1. Airports
3.9.1.2. Airlines
3.9. REVENUE MANAGEMENT AND PRICING
3.9.1. Drivers of Air Traffic Demand
3.9.2. Seasonality
3.9.3. Price Elasticities of Demand in Air Travel
3.9.4. Share of Travel Classes by Bookings April – September 2018
3.9.5. Fare Comparison April 2018
3.9.6. Fare Benchmarking Analysis
3.9.6.1. Perth - London - Perth
3.9.6.2. London - Perth - London
3.9.6.3. Fare Benchmarking Analysis: Key Findings
4.0 SWOT ANALYSIS
5.0 REVENUE-COST MODEL
5.1. ROUTE CHOICE
5.2. AIRCRAFT CHOICE
5.2.1. Payload/Range
5.2.2. Aircraft Configuration
5.2.3. Comparison: QF’s 787-9 vs. OAL’s 787-9
5.3. REVENUE MODEL
5.3.1. Passenger Revenue
5.3.2. Ancillary Revenue
5.3.3. Overview of Total Revenue
5.3.3.1. Breakdown of Total Revenue
5.4. COST MODEL
5.4.1. Fixed {Standing) Direct Operating Costs
5.4.1.1. Aircraft Standing Charges
5.4.1.2. Fixed Crew Costs
5.4.2. Variable Direct Operating Costs
5.4.2.1. Fuel Costs
5.4.2.2. Variable Crew Costs
5.4.2.3. Maintenance Costs
5.4.2.4. Airport and Route Charges
5.4.2.5. Passenger Service Charges
5.4.2.6. Handling
5.4.3. lndirect Operating Costs
5.4.3.1. Ticketing, Sales and Promotion
5.4.4. Overview of Total Costs
5.4.4.1. Breakdown of Total Costs
5.4.4.2. Overview of Costs per ASK
5.5. RESULTS FROM REVENUE-COST MODEL
5.5.1. Load Factor Performance
5.5.2. Break-Even Load Factor
5.5.3. Profit and Yield Development
5.5.4. Performance Overview
5.6. SENSITIVITY ANALYSIS
5.6.1. First Sensitivity Scenario
5.6.2. Second Sensitivity Scenario
5.6.3. Sensitivity Analysis: Conclusion
6.0 RISK ANALYSIS
6.1. RATING OF SCENARIOS
6.2. GROUPING OF POTENTIAL RISKS
6.3. RISK ANALYSIS: CONCLUSION
7.0 FINAL CONCLUSION
8.0 RELATED MATERIAL
8.1. LIST OF ABBREVIATIONS
8.2. LIST OF FIGURES AND TABLES
8.2.1. List of Tables
8.2.2. List of Figures
8.3. INTERVIEW TRANSCRIPTS
8.4. RESULTS FROM SURVEY
9.0 BIBLIOGRAPHY
9.1. INTERVIEWEES
9.2. BOOKS
9.3. OTHER PUBLICATIONS
9.4. WEB RESEARCH
Objectives and Research Themes
The primary objective of this project is to evaluate whether ultra long-haul air transport operations are commercially viable and profitable. By analyzing the Perth-London route operated by Qantas as a case study, the research aims to fill a gap in academic literature by identifying critical drivers of feasibility, such as fuel efficiency, premium cabin demand, and cost management in the era of new long-range aircraft.
- Analysis of market dynamics and influencing drivers for ultra long-haul growth.
- Development of a detailed revenue-cost model based on operational data.
- Evaluation of premium passenger behavior and price sensitivity.
- Strategic assessment of route performance using sensitivity and risk analysis.
Excerpt from the Book
1.3.1. Causes for the Suspension of Ultra Long-Haul Operations
Until 2012 there had been a trend against non-stop US-India services with total flying hours of over 15 hours each leg (CAPA, 2012). Delta -for instance- tried serving Mumbai three times from New York and Atlanta between 2005 and 2009 before withdrawing the route in 2009 (CAPA, 2012). Due to rationalising the network as part of American's bankruptcy filing in 2012, American ended its direct daily service from Chicago to New Delhi after seven years of operations. According to American (CAPA, 2012), the route was also cancelled due to the poor financial performance and weak future outlook regarding the global economic climate and high oil price development. Additionally, Air India entered the Chicago-New Delhi market in 2009 and so the yield pressure on the India-US market increased, mainly driven by the Gulf carriers and European hub carriers with competitive pricing, lower cost bases, more efficient operations due to geographical advantages and a significant share of connectivity with a noticeable reduction in total travel time. Therefore, both airlines were unable to attract a premium for their services competing in a VFR-driven market with higher price consciousness.
Besides, the increasing costs due to a large amount of fuel burn and the almost 20% depreciation of the Indian currency against the US dollar in 2012, which led to weaker inbound travel demand from India to the US, were additional factors which negatively impacted the profitability and viability of the ULH route (CAPA, 2012). Targeting a high share of premium traffic, SIA operated non-stop flights between Singapore, Los Angeles, and Newark from 2004 to 2013 using A340-500s. The route from Singapore to Newark covered 15,345 kilometres and was scheduled at 18 hours and 55 minutes and 18 hours 40 minutes for the return leg. Before the re-configuration to an all-business configuration in 2008, SIA configured their A340-500s with 117 Premium Economy and 64 Business Class seats (CAPA, 2013).
Summary of Chapters
1.0 INTRODUCTION TO FINAL MSC PROJECT: This chapter introduces the research focus on ultra long-haul viability and outlines the methodology for analyzing the Perth-London market.
2.0 CURRENT MARKET OVERVIEW OF ULTRA LONG-HAUL FLIGHTS: This section examines the current status of ultra long-haul routes and discusses critical drivers like fuel prices, aircraft technology, and premium travel demand.
3.0 PERTH-LONDON MARKET ANALYSIS: A deep dive into the specific route performance, focusing on competition, passenger demographics, and Qantas' business model.
4.0 SWOT ANALYSIS: An identification of strengths, weaknesses, opportunities, and threats concerning the Perth-London ultra long-haul operation.
5.0 REVENUE-COST MODEL: Details the economic modeling of the route, covering aircraft choice, revenue structures, cost breakdowns, and sensitivity analysis.
6.0 RISK ANALYSIS: An evaluation of potential operational, financial, and strategic risks associated with ultra long-haul flight operations.
7.0 FINAL CONCLUSION: Summarizes findings on the profitability of ultra long-haul flights and provides a outlook for future industry developments.
8.0 RELATED MATERIAL: Contains supporting documentation including lists of abbreviations, tables, figures, and qualitative interview transcripts.
9.0 BIBLIOGRAPHY: A comprehensive list of academic and industry sources used throughout the research.
Keywords
Ultra Long-Haul, Qantas, Perth-London, Revenue-Cost Model, Airline Profitability, Jet Fuel Prices, Premium Economy, Business Class, Network Strategy, Aviation Economics, Boeing 787-9, Feeder Traffic, Air Transport Management, Market Analysis, Risk Analysis
Frequently Asked Questions
What is the core focus of this research?
This research evaluates the commercial viability of ultra long-haul (ULH) flight operations by using Qantas' non-stop service between Perth and London as a primary case study.
What are the main thematic fields covered?
The work covers airline business models, revenue management, cost structures (specifically fuel and labor), fleet efficiency, and the impact of premium passenger demand on route profitability.
What is the primary goal of the project?
The primary objective is to produce evidence on whether ultra long-haul flights can be commercially profitable in current scenarios and to fill existing gaps in academic literature regarding these high-intensity operations.
Which scientific methodology is applied?
The author uses a mixed-methods approach, combining detailed quantitative revenue-cost modeling with qualitative insights gathered from industry expert interviews and passenger surveys.
What topics are discussed in the main body?
The main body treats market developments for ultra long-haul routes, a detailed analysis of the Perth-London route, cost models for operating modern aircraft like the Boeing 787-9, and risk assessments for the aviation industry.
Which keywords best characterize this project?
Key terms include Ultra Long-Haul, Qantas, Revenue-Cost Model, Airline Profitability, Premium Economy, and Network Strategy.
How does the project account for fuel price volatility?
The project includes a dedicated sensitivity analysis that applies different fuel price scenarios to test the resilience and breakeven point of the airline's financial model against historical price fluctuations.
What role does Qantas' Perth-London route play in the research?
It serves as a real-world testing ground for ultra long-haul viability, providing empirical data that the author uses to build the revenue-cost model for the study.
What conclusion does the author reach regarding profitability?
The author concludes that ultra long-haul operations can be profitable when targeting premium segments, provided that airlines rigorously manage costs and leverage the efficiency of modern aircraft.
- Quote paper
- Linus Benjamin Bauer (Author), 2019, The Commercial Viability of Ultra Long-Haul Operations. Evidence from Qantas' Perth-London Service, Munich, GRIN Verlag, https://www.grin.com/document/469332
