Have you ever thought of the importance of airline routes? A great choice can lead to great profit over one single route, take as an example the route London Heathrow (LHR) to New York (JFK), which is the highest profit route in the world (€ 1.000.000.000/year) mostly due to the high first and business class occupancy. But it can also go the other way around, where airlines by flying to the wrong places have major loses. So, what are the factors that airlines take into consideration?
When airlines plan to open new routes, the first questions they ask are: “How many people want to go there?” and “How much are they willing to pay?”. Even if they seem easy questions, the answer is not as straight forward.
Airlines have several ways to determine how many people would fly a certain route that is not yet operated. Some of them are:
- Data from passengers having connecting flights. Let’s consider the example of a route departing from Madrid, connecting through Frankfurt to finally reach Copenhagen. If the number of passengers departing from Madrid reaching Copenhagen is high enough, an airline might consider opening a new route there.
- Data from passengers having multiple connecting flights. Airlines might consider opening a new route to reduce the number of stops of a given route. Consider the previous example but adding the route Lisbon – Madrid. By making the route Madrid – Copenhagen non-stop, the Lisbon – Copenhagen route is shorter.
- Data from search engines. Airlines take advantage of the data from users looking for flights on the internet to determine what are the destinations passengers are interested into for new routes possibilities.
Continuing with the other question, are passengers willing to pay for the convenience of having a non-stop flight? The answer to this is complex, but airlines need to analyze the competition and passenger preferences since there are cases where the competition has more accessible flights to that destination by having stops but also passengers may prefer a premium non-stop service at a higher price, it depends on the kind of passengers that will be taking the route (business or tourism). The perfect example is the London to New York route, where most are business passenger, therefore they are willing to pay more for a direct service.
The previous two questions are a key part for an airline to consider opening a new route. Other cases, where airlines might open a new route are:
- Fly a certain type of aircraft to another place to increase profit.
- To keep away competitors. Big airlines will open new routes with a higher risk tolerance, in same places where smaller competitor open a new one to drive the competitor away.
But in all, a perfect route for a certain airline may exist that will make passengers happy and increase the airline’s profit BUT for this to exist, the airline must have the adequate aircraft for the route and comply with all the regulations from the departing and arriving country. Sounds that being a network planer is a tough job, isn’t it?