Money grounds Qantas flights, analyst says

[Adam P.]

Bottom line is so long as the income exceeds the costs inccoured by actually flying it is cheaper to fly than stay on the ground.

...and as they didn't fly, some external factor must be weighing into the decision. Like, oh I dunno, a large cloud of volcanic ash, maybe?

[Dave Powell]

Originally Posted by Ash W

Dave I disagree to an extent.

If lets say it costs $10,000 in fixed (sunk) costs (including labour fee's etc) to not fly clearly with $0 in income for that flight and it cost $20,000 to fly with an income of $25,000. How can it be cheaper to stay on the ground? Even flying at a loss with say an income of $15,000 is still $5000 cheaper than staying on the ground.

Bottom line is so long as the income exceeds the costs inccoured by actually flying it is cheaper to fly than stay on the ground.

Ash

If you stay on the ground you spend $10k and receive nothing - agreed.
If you fly and receive $25k income for $20k marginal cost (fuel etc) - yes it is better to fly as you are contributing (25-20) = $5k towards your $10k sunk cost.

If however you get income of say $15k and the marginal cost of flying is $20k your net spend is $5k on top of your sunk costs (i.e more expensive than staying on the ground).

cheers

Dave

[Ash W]

Originally Posted by Adam P.

...and as they didn't fly, some external factor must be weighing into the decision. Like, oh I dunno, a large cloud of volcanic ash, maybe?

Exactly, which is what makes the claim that they didn't fly for purley commercial reasons wrong. In other words it cost them more to stay grounded.

[Paul McFarlane]

If I may just interrupt for a moment..

Here is the Jetstar rebuttal from news.com.au

[lloyd fox]

Well they have added to their own costs by placing full page adds in all Australian newspapers the past 2-3 days.

[Radi K]

Dave you raise valid points but you are failing to consider the need to re protect passengers on other airlines (even your own later on), putting them up in accommodation, even offering refunds etc. Full flights when the ash departs doesn't necessarily mean the aircraft is making money for you on that given day. You could have sold those empty seats, even some, at a premium, to make that particular flight profitable. But airlines don't look at profitability based on a specific flight, or if they do it's rare. Its mostly on a citypair basis and sometimes tweaking of the flight schedule is necessary to achieve the optimum yield, based on maximum connections etc.

I can assure you that within the airline environment, the financial burden because of serious disruption (be it weather, IT, ATC etc etc) far exceeds the operating costs of flying an aircraft half empty. Aircraft and crew end up out of position, maintenance cannot be completed, it does untold damage to your brand etc.

If your theory is correct, airlines would be cancelling flights left right and centre that were not making money on a given day. Most cancellations in Australia and indeed worldwide come about because of operational reasons. (lack of crew, weather, engineering etc)