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What the Performance Measures Show First Quarter Results 2001-2006

What the Performance Measures Show
First Quarter Results 2001-2006

Financial Measures

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

  • The network carriers have begun to recover from deterioration in their profit margin performance that began with the economic slowdown in 2001 followed by the huge drop in operating profitability after Sept. 11, 2001. 
  • Led by Southwest Airlines, the low-lost carriers have consistently shown a profit per enplanement but have not returned to the 2001 levels.
  • In the first quarter of 2006, two of the seven network carriers and two of the seven low-cost carriers reported an operating profit per enplanement.
  • The network best and worst operating profit/loss per enplanement performances were US Airways and Delta Airlines respectively.
  • For the low-cost group, America West Airlines and ATA Airlines had the best and worst profit/loss per enplanement results in the first quarter of 2006.

Return to Performance Measure 1

 

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

  • Network carrier costs rose faster than low-cost carrier costs from 2001 to 2006.
  • Network carriers’ operating expense per enplanement increased $28 per enplanement or 30 percent from the first quarter of 2001.  A 344 percent 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.  The network carriers operated 31 percent fewer mainline flights in 2006 than in 2001.
  • Operating costs per enplanement for low-cost carriers increased only $1 per passenger or 2 percent from 2001 to 2006. The low-cost carriers’ core operating expenses per enplanement, excluding fuel and labor costs, were $77 lower than the network carriers compared to a $50 cost advantage in 2001.

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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 93 percent in 2001 to 79 percent in 2006---a falloff of 15 percent.  
  • The low-cost group’s cost control efforts since 2001 has substantially improved its revenue to operating cost margin by 22 percent – from 119 percent to 145 percent.
  • The leading margin network carrier was American Airlines at 121 percent (below the low cost group average of 145 percent), and the best performing low-cost airline was Southwest Airlines with a 200 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 16 percent from 92 FTE’s per aircraft in 2001 to 77 in 2006.
  • The network carriers outdid the low-cost group, reducing FTE’s per aircraft by 23 percent or 29 fewer employees per aircraft from 2001 to 2006.
  • In the network group, United Airlines had the best percentage improvement with a 28 percent reduction in FTE’s per aircraft while Continental Airlines exhibited the least improvement with a 16 percent reduction. 
  • JetBlue Airlines led the low-cost group with a 25 percent reduction in FTE’s per aircraft while Frontier Airlines lagged the group with a 7 percent increase in FTE 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 56 revenue airborne minutes per FTE in 2001 to 74 minutes in 2006 – a performance improvement of 32 percent.
  • The network carrier performance improved 28 percent with an increase in revenue airborne minutes per FTE of 35 minutes – to 157 minutes – compared to the low cost carrier gain of 53 minutes to 231 minutes per FTE.
  • AirTran Airlines led the low-cost group with more than four hours of airborne time per FTE at 258 minutes. 
  • The leading network carrier was Alaska Airlines which generated 205 minutes ---below the low-cost average of 231 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 2001 to 2006 in this critical category but the low-cost carriers still boarded 67 percent more passengers per employee than the average for the network group.
  • The network carriers boarded 117 passengers per FTE in 2006, 38 percent more than 2001, while the low-cost carriers boarded 195 passengers per FTE, 19 percent more than 2001.
  • Southwest Airlines was the low-cost group leader with 234 enplanements per FTE. ATA Airlines trailed the group with 75 enplanements per FTE. 
  • US Airways led the network group with 149 enplanements and United Airlines lagged the group with 102 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 2006 to $55 per enplanement from $28 in 2001.
  • Although the low-cost group’s 2006 fuel cost per enplanement at $31 per enplanement was 44 percent less than the network cost, it still represented a sharp increase over the 2001 expense of $14 per enplanement. 
  • United Airlines’ fuel expense in 2006 of $66 per enplanement was the highest of the network group with US Airways’ $38 per enplanement the least expensive.
  • ATA Airlines had the highest fuel cost per enplanement in the low-cost group at $80 while heavily fuel-hedged Southwest Airlines enjoyed the lowest expense of only $24 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 $16 from 2001 to 2006.
  • The financially stronger low-cost carrier group’s compensation expenses increased $5, reflecting the low-cost group’s increasingly senior work force and subsequent wage increases.
  • The 2006 low-cost carriers’ employee compensation per enplanement was still $27 less per enplanement than that paid by network carriers, compared to $48 less in 2001.
  • United Airlines’ labor costs per enplanement were highest among the network carriers at $70 while US Airways had the least expensive labor costs at $41 per enplanement.  US Airways’ costs were still higher than all carriers in the low-cost group excluding ATA’s $93 per enplanement.

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

  • From 2001 to 2006, low-cost carrier annual compensation costs increased 40 percent while the network airline growth was 10 percent reflecting the networks’ more senior remaining employee group after several significant layoffs.
  • The annual compensation cost gap between the two groups was reduced to $7,514 in 2006 compared to $22,139 in 2001. 
  • US Airways reported the lowest annual compensation among the network carriers, which at $73,642 was still higher than five of the seven low-cost airlines.
  • Southwest Airlines’ average annual compensation of $95,555 was higher than all the network airlines. Southwest’s $34 compensation per enplanement was $7 lower than the $41 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