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What the Performance Measures Show Annual 2001-2006 Results

What the Performance Measures Show
Annual 2001-2006 Results

Financial Measures

Measure 1: System Operating Profit/(Loss) per Originating Passenger (Tables 1-3):

In 2006, the network carriers surpassed the low-cost carriers in system operating profit/loss per originating passenger for the first time since 2000.

  • In 2006, all of the network carriers except Delta and Alaska exceeded the profitability per originating passenger of Southwest, the most profitable of the low-cost airlines.
  • The 2006 results reversed the post-2000 trend when network carriers showed large losses while the low-cost carriers, led by Southwest, consistently reported a profit per originating passenger. Although their profits continued, the low-cost carriers have not returned to the profit levels of 2000.
  • Of the network carriers, Northwests and US Airways profitability per originating passenger was over $25 while American and Continental exceeded $13 and United was above $11.
  • In the low-cost group, Southwest was the leader with almost $11 per passenger with only JetBlue and AirTran showing profitability, while Frontier, America West, Spirit and ATA reported operating losses per originating passenger. ATAs loss per originating passenger was $15.64.

Return to Performance Measure 1

 

Measure 2: System Operating Expenses (excluding Regional Jet Contract) per Originating Passenger (Tables 4-6):

  • The low-cost carriers spent $198 less per passenger than the network airlines in 2006. That spread per passenger maintained the cost advantage the low-cost carriers have sustained since 2001. The spread has ranged from $208 to $190.
  • Unit costs for the last four months of 2001 were inflated. The National Air Space was temporarily shut down after September 11 while the airlines were saddled with fixed operating costs that anticipated normal operations.
  • Operating costs per enplanement for low-cost carriers increased $19 per passenger or 18 percent, mainly related to double-digit fuel cost increases and higher wages for a maturing work force. The network carriers aggressive downsizing in operations reduced other costs, partially offsetting the rise in fuel expense and holding the cost increase to $9 per passenger.
  • ATA had the highest expense per passenger at $396 while Southwest operating cost per passenger was the lowest at $95.

Return to Performance Measure 2

 

Measure 3: System Operating Expenses (excluding Regional Jet Contract) per Aircraft (Tables 7-9):

  • The 2000 gap of $10.3 million in cost per aircraft between the low-cost carriers and the network airlines was the largest since at least 2000. The gap widened even though low-cost carrier operating expenses per aircraft increased by 24 percent from 2001 to 2006 while network costs per aircraft rose by 18 percent. The higher network costs reflect the larger size of their aircraft.
  • Operating costs per aircraft rose for all the network carriers except US Airways, which reduced expenses by $4.8 million per aircraft. Delta had the highest average cost per aircraft in 2006 at $35.9 million. US Airways at $22.4 million had the lowest aircraft expense in 2006 in the network group. US Airways cost was higher than all but two of the low-cost airlines expense per aircraft.
  • In the low-cost group, ATA had the highest average cost per aircraft at $35.6 million. Spirits increase of 45 percent from 2001 to 2006 was the most in the low-cost group. AirTran had the lowest overall average cost per aircraft among the low-cost airlines at $16.2 million per aircraft but JetBlue, at 13 percent, reported the lowest rate of operating expense growth per aircraft from 2001 to 2006.

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Measure 4 (Tables 10-12): Passenger Revenue per Originating Passenger (excluding Regional Jet Contract Revenue):

  • The network airlines collected $293 for every originating passenger in 2006, $171 more than the $122 the low-cost airlines collected. The gap grew more than 15 per cent from 2001 as the network airlines increased their international service.
  • Both groups benefited from fare increases that began in mid-2005. Network airlines passenger revenue per originating passenger rose 6 percent from 2001 to 2005 but 10 percent from 2005 to 2006. Low-cost carrier revenue per passenger rose 11 percent from 2001 to 2005 and 8 percent from 2005 to 2006.
  • Among the network carriers only American had less passenger revenue per originating passenger in 2006 than in 2001. United, at $355, had the most revenue per originating passenger among the network carriers. Delta with an increase of $64 per passenger from 2001 had the largest gain of the network carriers. Alaska reported the $194 in revenue per passenger, the lowest of the network group.
  • The best performing low-cost airline was ATA with $371 per originating passenger. Southwest trailed the rest of the low-cost group with $100 per passenger. Frontier reported a $36 reduction in its revenue per passenger compared to 2001, the only low-cost carrier with a loss in revenue.

Return to Performance Measure 4

 

Employment and Traffic Measures

Measure 5 (Tables 13-15): Full-Time Equivalent Employees (FTEs) per Aircraft:

  • The network airlines closed the gap in FTEs per aircraft with the low-cost airlines between 2001 and 2006. In 2001, the network carriers employed 38 more FTEs per aircraft than the low-cost carriers. In 2006, the gap closed to 28 FTEs per aircraft. FTEs per aircraft is a measure of operational efficiency.
  • Low-cost carriers reduced FTEs per aircraft by 17 percent from 90 FTEs per aircraft in 2001 to 75 FTEs in 2006.
  • The network carriers did even better by reducing FTEs by 20 percent or 25 fewer FTEs per aircraft.
  • The industry showed a wide-range of performance, with AirTran reporting 62 FTEs per aircraft, the fewest of any carrier and about half the 123 FTEs reported by Delta and ATA.
  • In the network group, Northwest, Alaska and US Airways reported the fewest FTEs per aircraft. United, American and Delta reported the most.
  • US Airways reduced FTEs per aircraft by 42 percent, the best improvement in the network group followed by United with a 27 percent decrease. Delta increased FTEs per aircraft by 5 to 123.
  • In the low-cost group, AirTran, Spirit and Southwest reported the fewest FTEs per aircraft. ATA and America West reported the most.
  • Southwest led the low-cost group with a 20 percent reduction in FTEs per aircraft while Frontier and America West lagged the group with a 3 percent increase.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 5

 

Measure 6 (Tables 16-18): Average monthly Available Seat-Miles (ASMs) per Full-Time Equivalent Employee (FTE)

  • Both the network carriers and low-cost airlines substantially improved productivity with more ASMs generated per FTE from 2001 to 2006.
  • The network carriers, with a 46 percent improvement, cut the 23 million ASM per FTE gap with the low-cost carriers in 2001 by 40 percent in the five years. The low-cost carriers improved 35 percent. But the low-cost carriers still generated 14 million more ASMs per FTE than the network carriers in 2006.
  • The network and low-cost airlines increased their average ASMs flown per FTE by flying longer distances with larger aircraft in 2006 than in 2001.
  • JetBlue generated 252 million monthly ASMs per FTE, the most of any network or low-cost airline in 2006 although its 12 percent increase over the 2001 average was the lowest gain for the low-cost group. ATA improved its performance over 2001 by 79 percent.
  • Northwest generated 235 million monthly ASMs per FTE, the most of any network carrier. United and US Airways showed the most improvement with increases of 53 percent or greater, from 2001 to 2006. American, with 197 million ASMs per FTE, was the last place performer among the network airlines.
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 6

 

Measure 7 (Tables 19-21): Average Monthly Revenue Aircraft Minutes per Full-Time Equivalent Employee (FTE)

  • The low-cost carrier group has a wide advantage over the network airlines in average monthly revenue air minutes per FTE, a key productivity measurement. The low-cost group improved its performance by 59 minutes from 2001 to 2006 and as a result, raised its 2001 advantage of 56 minutes over the network carriers to 72 minutes in 2006 expanding the gap by 29 percent.
  • The network carriers improved by 36 percent, but the increase in revenue airborne minutes per FTE was only 43 minutes to 162 minutes compared to the low cost carrier gain of 72 minutes to 234 minutes or nearly four hours per FTE.
  • AirTran led the low-cost group with nearly four and one-half hours of airborne time per FTE at 263 minutes. Five low-cost carriers generated more minutes per FTE than the leading network carrier.
  • The leading network carrier was Alaska Airlines which generated 208 minutes of airborne time per FTE. American lagged the group with 146 minutes per FTE.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 7

 

Measure 8 (Tables 22-24): Average Monthly Originating Passengers per Full-Time Equivalent Employee (FTE)

  • Both the network and low-cost groups improved their performance from 2001 to 2006 but the low-cost carriers still boarded more than twice as many passengers per employee than the network group. The gap with the network carriers was moderately smaller in 2006 than in 2001.
  • The network carriers improved performance by 44 percent from 2001 to 2006 while the low-cost carriers improved by 25 percent. But the low-cost carriers added 35 passengers per FTE compared to 23 for the network carriers.
  • In 2006, the low-cost carriers generated 173 originating passengers per FTE employee compared to 75 passengers per FTE for the network airlines.
  • Southwest was the low-cost group leader with 223 originating passengers per FTE. ATA trailed the group with 61 passengers per FTE.
  • Alaska led the network group with 111 originating passengers and United lagged the network group with 62 passengers per FTE.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 8

 

Operating Expense Measures

Measure 9 (Tables 25-27): Fuel Cost Per Originating Passenger:

  • Fuel expense per originating passenger rose sharply for both carrier groups in 2006.
  • The network airlines fuel cost per originating passenger more than doubled from 2001 to 2006, rising to $98 per passenger from $43.
  • The low-cost groups 2006 fuel cost per originating passenger of $37 was less than half the network cost but it was a sharp increase over the 2001 expense of $18 per passenger. It was still $6 less than the network fuel costs in 2001.
  • The low-cost group paid $61 less in fuel costs per originating passenger than the network carriers in 2006. In 2001, the low-cost carriers paid $25 less.
  • United, Northwest and Delta all had fuel expense of more than $100 per originating passenger in 2006, the highest of the network group. Alaska Airlines cost of $62 per passenger was the least expensive.
  • ATA paid $121 for fuel per originating passenger, the most in both groups, while heavily fuel-hedged Southwest had the lowest expense of only $27 per passenger.
  • Five of the seven low-cost airlines fuel expense per originating passenger was lower than the least expensive network carriers unit fuel expense.

Return to Performance Measure 9

 

Measure 10 (Tables 28-30): Average Full-Time Equivalent Employee (FTE) Compensation Per Originating Passenger:

  • The network carrier group reduced labor expense per originating passenger by $32 from 2001 to 2006.
  • The financially stronger low-cost carrier groups compensation expenses increased a modest $4 per originating passenger, reflecting wage increases for the groups increasingly senior work force partially offset by sustained operational efficiencies.
  • The 2006 low-cost carriers employee compensation per originating passenger was still $56 less per passenger than that of the network carriers, compared to $92 less per passenger in 2001 when the network numbers were significantly impacted by September 11.
  • Uniteds labor expense per passenger was highest among the network carriers at $115 while Alaska had the lowest labor costs at $66 per passenger. Alaska was the only network carrier in 2006 with higher labor costs per originating passenger than in 2001. United reduced labor costs by $56 per originating passenger from 2001 to 2006, the most of any of the carriers.
  • Alaska, the network carrier with the lowest labor cost per originating passenger, paid more than all carriers in the low-cost group excluding ATAs $115 per passenger.
  • AirTran Airways, at $28 per originating passenger, had the lowest labor expense in the low-cost group while Frontier and AirTran were the two low-cost carriers that reduced their labor costs per originating passenger compared to 2001.

Return to Performance Measure 10

 

Measure 11 (Tables 31-33): Average Annual Full-Time Equivalent Employee (FTE) Compensation:

  • From 2001 to 2006, low-cost carrier annual compensation costs rose 40 percent while network airline costs were up a more modest 8 percent reflecting the networks stringent labor cost-cutting policies in the aftermath of September 11.
  • The annual compensation cost gap between the two groups was reduced to less than $5,000 in 2006 from over $21,000 in 2001.
  • Low-cost carrier Southwest Airlines average annual compensation of $100,254 was the highest of the 14 airlines. In 2001, all the network carriers had higher average compensation than Southwest.
  • Three low-cost carriers, Southwest, ATA and Spirit, had average labor cost increases of more than $20,000 in the five years. Only network carrier US Airways reduced average annual labor costs from 2001.
  • Northwests average annual compensation of $91,618 was the highest of the network carriers. US Airways reported the lowest annual compensation among the network carriers, which at $74,204 was higher than five of the seven low-cost airlines.
  • Southwests average compensation was nearly $17,000 higher than ATA, the next highest low-cost carrier. Although Southwest had the highest average compensation, the carriers $37 labor cost per originating passenger was 44 percent less than the $66 per passenger paid by Alaska Airlines, the lowest network carrier (Performance Measure 10).
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Performance Measure 11