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What the Performance Measures Show Annual 2000-2005 Results

What the Performance Measures Show
Annual 2000-2005 Results

Financial Measures

Performance Measure 1 (Tables 1-3): System Operating Profit/(Loss) per Enplanement:

  • In 2005, none of the seven network carriers and only three of the seven low-cost carriers reported an operating profit per enplanement.
  • The network carriers have not fully recovered from the huge drop in operating profitability following Sept. 11, 2001. In fact, their profit margin performance started deteriorating before 9/11. 
  • Led by Southwest Airlines, the low-lost carriers have consistently shown a profit per enplanement but have not returned to the levels attained in 2000.
  • The network best and worst operating profit/loss per enplanement performances were Alaska Airlines and Northwest Airlines respectively.
  • In the low-cost group, Southwest Airlines and Spirit Airlines had the best and worst profit/loss per enplanement results in 2005.

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Performance Measure 2 (Tables 4-6): Operating Expenses (Excluding Fuel/Labor) per Enplanement:

  • Network carrier costs rose faster than low-cost carrier costs from 2000 to 2005.
  • Network carriers’ operating expense per enplanement increased $30 per enplanement or 38 percent from 2000.  A rise in contract payments to regional affiliates was the primary cause of the operating expense increase as network airlines substituted regional service for their own flights.
  • Operating costs per enplanement for low-cost carriers increased only $5 per passenger or 14 percent, mainly related to double digit capacity growth.
  • The low-cost carriers’ core operating expenses, excluding fuel and labor costs, per enplanement were $68 lower than the network carriers compared to a $43 cost advantage in 2000.

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Performance Measure 3 (Tables 7-9): Passenger Revenue per Enplanement as a Percentage of System Operating Expenses (Excluding Fuel/Labor) per Enplanement:  

  • The network carrier group has a revenue premium per enplanement compared to the low-cost airlines. The networks also have much higher operating cost per enplanement levels. Combined with overall reduced industry fare levels, these higher costs have reduced the structural advantage from their revenue premium.
  • Network airlines’ passenger revenue per enplanement margin versus their operating costs (excluding labor/fuel) per enplanement has declined from 109 percent in 2000 to 80 percent in 2005---a falloff of 27 percent. 
  • The low-cost group’s cost control efforts since 2000 has slightly improved their revenue to operating cost margin by 2 percent – from 125 percent to 127 percent.
  • The leading margin network carrier was Alaska Airlines at 119 percent (below the low cost group average of 127 percent), and the best performing low-cost airline was Southwest Airlines with a 190 percent margin. 

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Employment and Traffic Measures

Performance Measure 4 (Tables 10-12): Average Full-Time Equivalent Employees per Aircraft:

  • Low-cost carriers reduced their employees per aircraft (a measure of operational efficiency) by 14 percent from 92 FTE’s per aircraft in 2000 to 79 in 2005.
  • The network carrier outdid the low-cost group, reducing FTE’s per aircraft  by 21 percent or 27 fewer employees per aircraft from 2000 to 2005..
  • In the network group, Northwest Airlines had the best percentage improvement with a 30 percent reduction in FTE’s per aircraft while Continental Airlines exhibited the least improvement at a 13 percent reduction. 
  • JetBlue Airways led the low-cost group with a 25 percent reduction in FTE’s per aircraft while America West Airlines lagged the group with a 9 percent increase in FTE’s per aircraft. 
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

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Performance Measure 5 (Tables 13-15): Average Revenue Aircraft Minutes per Full-Time Equivalent Employee:

  • The low-cost carrier group has maintained a wide advantage over the network airlines improving its advantage of 53 revenue airborne minutes per FTE in 2000 to 66 minutes in 2005 – a performance improvement of 27 percent.
  • The network carrier performance improved 27 percent with an increase in revenue airborne minutes per FTE of 34 minutes – to 158 minutes – compared to the low cost carrier gain of 47 minutes to 224 minutes per FTE.
  • AirTran Airlines led the low-cost group with nearly four hours of airborne time per FTE at 251 minutes.  
  • The leading network carrier was Alaska Airlines which generated 222 minutes of airborne time per FTE – below the low-cost average of 224 minutes---of airborne time per FTE.
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

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Performance Measure 6 (Tables 16-18): Average Enplanements per Full-Time Equivalent Employee:  

  • Both groups improved their performance from 2000 to 2005 in this critical category but the low-cost carriers still boarded 69 percent more passengers per employee than the average for the network group.
  • The network carriers boarded 123 passengers per FTE in 2005, 27 percent more than 2000, while the low-cost carriers boarded 208 passengers per FTE, 11 percent more than 2000.
  • Southwest Airlines was the low-cost group leader with 255 enplanements per FTE. ATA Airlines trailed the group with 117 enplanements per FTE. 
  • US Airways and Alaska Airlines led the network group with 162 enplanements and United Airlines lagged the rest of the group with 104 enplanements per FTE.
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

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Operating Expense Measures

Performance Measure 7 (Tables 19-21): Average Fuel Cost per Enplanement:  

  • In the last year, fuel expense per enplanement rose sharply for both carrier groups.
  • The network airlines’ fuel cost per enplanement nearly doubled in 2005 to $49 per enplanement from $25 in 2000.
  • Although the low-cost group’s 2005 fuel cost of $31 per enplanement of was less than half the network cost, it still represented a sharp increase over the 2000 expense of $14 per enplanement. 
  • United Airline’s fuel expense in 2005 of $59 per enplanement was the highest of the network group with Alaska Airline’s $35 per enplanement the least expensive.
  • ATA Airlines had the highest fuel cost per enplanement in the low-cost group at $43 while heavily fuel-hedged Southwest Airlines enjoyed the lowest expense of only $15 per enplanement.

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Performance Measure 8 (Tables 22-24): Average Full-Time Equivalent Employee Compensation per Enplanement:

  • Through aggressive cost-cutting measures and abrogation of contractual labor expenses through the bankruptcy courts, the network carrier group reduced labor expense per enplanement by $6 from 2000 to 2005.
  • The financially stronger low-cost carrier group’s compensation expenses rose $5, reflecting the low-cost group’s increasingly senior work force and subsequent wage increases.
  • The 2005 low-cost carriers’ employee compensation per enplanement was still $28 less per enplanement than that paid by network carriers, compared to $39 less in 2000.
  • Northwest Airline’s labor costs per enplanement were highest among the network carriers at $67 while US Airways had the least expensive labor costs at $35 per enplanement.  USA Airways costs were still higher than all carriers in the low-cost group excluding ATA’s $53 per enplanement.

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Performance Measure 9 (Tables 25-27): Average Annual Full-Time Equivalent Employee Compensation: 

  • From 2000 to 2005, low-cost carrier annual compensation costs increased 36 percent while the network airline growth was 13 percent reflecting the networks’ more senior remaining employee group after several series of significant layoffs.
  • The annual compensation cost gap between the two groups was reduced to $9,000 in 2005 compared to $19,000 in 2000.
  • Northwest Airlines’ average annual compensation of $107,645 exceeded the next highest network carrier compensation by more than $21,000.  US Airways reported the lowest annual compensation among the network carriers, which at $68,628 was higher than four of the seven low-cost airlines. 
  • Southwest Airlines’ average annual compensation of $90,669 was higher than all the network airlines except for Northwest.  Southwest’s $30 compensation per enplanement was $5 lower than the $35 per enplanement paid by of US Airways, the lowest network carrier (Performance Measure 8).
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 9