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What the Performance Measures Show First Quarter 2002-2007

What the Performance Measures Show
First Quarter 2002-2007

Financial Measures

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

In 2007, the network carriers generated a system operating profit per originating passenger in the first quarter for the first time since 2000.

  • In 2007, three network carriers - Northwest, Delta and US Airways -exceeded the profitability per originating passenger of America West, the most profitable of the low-cost airlines.
  • The 2007 results reversed the post 9/11 trend when network carriers showed large losses while 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 and 2001.
  • Northwest with more than $25 of profit per originating passenger topped the network carriers. American, Delta and US Airways profit exceeded $10 while Uniteds was just below $10.
  • America West was the leader among low-cost carriers with over $15 profit per passenger. Spirit, Southwest and AirTran also reported profits. Frontier, JetBlue and ATA reported operating losses per originating passenger. ATAs loss per originating passenger was $66.35.

Return to Measure 1

 

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

  • The low-cost carriers spent $204 less per passenger than the network airlines in the first quarter of 2007. That spread per passenger maintained the cost advantage the low-cost carriers have held over the network carrier since 2001. The spread has ranged from $232 to $176.
  • Operating costs per enplanement for low-cost carriers increased $18 per passenger or 17 percent, mainly due to 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 or 3 percent.
  • ATA had the highest expense per passenger at $459 while Southwest operating cost per passenger was the lowest at $104.

Return to Measure 2

 

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

  • The low cost carriers spent 2.2 million less per aircraft than the network carriers in the first quarter of 2007, even though their costs rose faster over the past five years. The network airlines operating cost per aircraft increased 25 percent over the first quarter of 2002 to $6.8 million per aircraft. The low-cost airlines costs increased 28 percent or $1 million more per aircraft compared to 2002. The higher network costs reflect the larger size of their aircraft.
  • Operating costs per aircraft rose for all the network carriers. United had the highest average cost per aircraft in the first quarter of 2007 at $8.0 million. US Airways at $5.6 million had the lowest aircraft expense in 2007 in the network group. US Airways cost was higher than all but one of the low-cost airlines expense per aircraft.
  • In the low-cost group, ATA had the highest average cost per aircraft at $6.9 million. ATAs increase of 46 percent from 2002 to 2007 was also the largest in the low-cost group. AirTran had the lowest overall average cost per aircraft among the low-cost airlines at $3.9 million per aircraft but JetBlue, at 10 percent, reported the lowest rate of operating expense growth per aircraft from the first quarter of 2002 to 2007.

Return to Measure 3

 

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

  • The network airlines collected $302 for every originating passenger in the first quarter of 2007, $181 more than the $121 collected by the low-cost airlines. The gap grew more than 22 per cent from 2002 as the network airlines increased their international service which generally produces higher passenger fares.
  • Both groups benefited from fare increases that began in mid-2005. Network airlines passenger revenue per originating passenger rose only 2 percent from 2002 to 2005 but 18 percent from 2005 to 2007. Low-cost carrier revenue per passenger rose 13 percent from 2002 to 2005 and 3 percent from 2005 to 2007. The low-cost group was very aggressive in adding new domestic capacity.
  • Among the network carriers, United, at $345, had the most revenue per originating passenger among the network carriers. Deltas increase of $90 per passenger from 2002 to 2007 was the largest among the network carriers. Delta is the network carrier with the greatest increase in international flights. Alaska reported $200 in revenue per passenger, the lowest of the network group.
  • The best performing low-cost airline was ATA with $383 per originating passenger. Southwest trailed the rest of the low-cost group with $101 per passenger. Frontier reported a $33 reduction in its revenue per passenger compared to 2002, the only low-cost carrier with a loss in revenue. Spirit and JetBlue were essentially flat compared to 2002 with minimal passenger revenue gains of only $2.

Return to Measure 4

 

Employment and Traffic Measures

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

  • The network airlines employed 26 more FTEs per aircraft than the low-cost airlines in the first quarter of 2007, the same gap that existed in 2002. FTEs per aircraft is a measure of operational efficiency.
  • Low-cost carriers reduced FTEs per aircraft by 17 percent from 88 FTEs per aircraft in 2002 to 73 FTEs in 2007.
  • The network carriers reduction was 13 percent and the same 15 fewer FTEs per aircraft.
  • The industry showed a wide-range of performance, with AirTran reporting 59 FTEs per aircraft, the fewest of any carrier and nearly half the 113 FTEs reported by United.
  • In the network group, Northwest, Alaska and US Airways reported the fewest FTEs per aircraft. United, American and Delta reported the most.
  • Northwest and United reduced FTEs per aircraft by 22 percent, the best improvement in the network group. Delta and Continental had the least improvement with decreases of 5 percent.
  • In the low-cost group, AirTran, Spirit and Southwest reported the fewest FTEs per aircraft. Frontier and America West reported the most.
  • Spirit led the low-cost group with a 28 percent reduction in FTEs per aircraft while Frontier and America West lagged the group with increases of 12 and 19 percent respectively.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to 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 2002 to 2007.
  • The network carriers, with a 41 percent improvement, were still unable to reduce the 23 million ASMs per FTE gap with the low-cost carriers that existed in 2002. The low-cost carriers improved 36 percent. But the low-cost carriers still generated 23 million more ASMs per FTE than the network carriers in the first quarter of 2007.
  • The network and low-cost airlines increased their average ASMs flown per FTE in part by flying longer distances with larger aircraft in 2007 than in 2002, particularly the network group.
  • Spirit generated 306 million monthly ASMs per FTE, the most of any network or low-cost airline in the first quarter of 2007. ATAs 66 percent increase from 2002 to 2007 was the largest gain for either group.
  • Northwest generated 243 million monthly ASMs per FTE, the most of any network carrier. United improved 53 percent from 2002 to 2007, the most of any network carrier. Americans 191 million ASMs per FTE was the fewest among the network airlines.
  • Full-time Equivalent Employee (FTE) calculations count part-time workers as one-half of a full-time employee.

Return to Measure 6

 

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

  • The low-cost carrier group maintained a wide advantage over the network airlines in average monthly revenue air minutes per FTE. The low-cost group improved its performance by 63 minutes from the first quarter of 2002 to 2007. As a result, the low-cost carriers raised increased their 2002 advantage of 54 minutes over the network carriers to 79 minutes in 2007 expanding the gap by 46 percent.
  • The network carriers improved by 38 revenue airborne minutes per FTE to 159 minutes, a 31 percent increase. The low-cost carriers gained 63 minutes to 238 minutes or nearly four hours per FTE.
  • AirTran led the low-cost group with over four and one-half hours of airborne time per FTE at 272 minutes. Five low-cost carriers generated more minutes per FTE than the leading network carrier.
  • The leading network carrier was Alaska Airlines which generated 198 minutes of airborne time per FTE. American lagged the group with 142 minutes per FTE.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Measure 7

 

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

  • The low-cost carriers still boarded more than twice as many passengers per FTE than the network group in the first quarter of 2007. Despite improvement by both the network and low-cost groups from the first quarter of 2002 the low-cost group boarded 97 more passengers per FTE than the network carriers compared to 76 more in 2002.
  • The network carriers improved performance by 38 percent from 2002 to 2007 while the low-cost carriers improved by 32 percent. But the low-cost carriers added 40 passengers per FTE compared to 19 for the network carriers.
  • In 2007, the low-cost carriers generated 166 originating passengers per FTE employee compared to 69 passengers per FTE for the network airlines.
  • Spirit was the low-cost group leader with 229 originating passengers per FTE. ATA trailed the group with 56 passengers per FTE.
  • Alaska led the network group with 94 originating passengers and United lagged the network group with 59 passengers per FTE.
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to 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 the first quarter of 2007.
  • The network airlines fuel cost per originating passenger more than doubled from 2002 to 2007, rising to $93 per passenger from $35.
  • The low-cost groups 2007 fuel cost per originating passenger of $38 was less than half the network cost but it was a sharp increase over the 2002 expense of $16 per passenger.
  • The low-cost group paid $55 less in fuel costs per originating passenger than the network carriers in 2007. In 2002, the low-cost carriers paid $19 less.
  • United, paying $114 per originating passenger, and ATA, paying $131 per passenger, were the two carriers with fuel expenses of more than $100 per originating passenger.
  • Alaska Airlines cost of $62 per passenger was the least of the network group.
  • ATA paid $131 for fuel per originating passenger, the most in both groups. Heavily fuel-hedged Southwest had the lowest expense of only $30 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 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 $41 from the first quarter of 2002 to 2007.
  • The financially stronger low-cost carrier groups compensation expenses increased a modest $3 per originating passenger, reflecting wage increases for the groups increasingly senior work force partially offset by sustained operational efficiencies.
  • The 2007 low-cost carriers employee compensation per originating passenger was still $59 less per passenger than that of the network carriers, compared to $103 less per passenger in 2002.
  • Uniteds labor expense per passenger was highest among the network carriers at $124 while US Airways had the lowest labor costs at $71 per passenger. Alaska was the only network carrier in 2007 with higher labor costs per originating passenger than in 2002. United reduced labor costs by $65 per originating passenger from 2002 to 2007, 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 $129 per passenger.
  • Spirit, at $26 per originating passenger, had the lowest labor expense in the low-cost group. Spirit, along with Frontier and AirTran, were the three low-cost carriers that reduced their labor costs per originating passenger compared to 2002.

Return to Measure 10

 

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

  • From the first quarter of 2002 to 2007, low-cost carrier annual compensation costs rose 43 percent. At the same time, network airline reduced costs by 1 percent through 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 $2,000 in 2007 from over $27,000 in 2002.
  • Low-cost carrier Southwest Airlines average annual compensation of $98,654 was the highest of the 14 airlines. In 2002, 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 carriers US Airways and Delta reduced average annual labor costs from 2002.
  • Northwests average annual compensation of $88,646 was the highest of the network carriers. Delta reported the lowest annual compensation among the network carriers, which at $72,612.
  • Although Southwest had the highest average compensation, the carriers $40 labor cost per originating passenger was 44 percent less than the $71 per originating passenger paid by US Airways, the lowest network carrier (Performance Measure 10).
  • FTE calculations count part-time workers as one-half of a full-time employee.

Return to Measure 11