The Rise of Messaging Services Will Be the Death of Call Centers Sponsored This content is created collaboratively with one of our sponsors.
We’re waiting for the flight attendant caught on tape warning a customer that he can easily be replace with a quiet block of much more valuable cargo.
If, when you fly, you have the feeling that you are being treated like cargo, you’re wrong.
The cargo is treated like cargo—and cargo is nice to airlines. Cargo doesn’t quibble about crowded conditions or expect special treatment. Cargo doesn’t get rowdy and problematic in-flight. Cargo doesn’t require cabin crew to cater to its needs. Most importantly, cargo pays well.
It represents between 15%-20% of the average airline’s earnings. Though that may not seem a lot, once a flight covers its costs with passenger capacity, any income from cargo goes to profits. Unlike more fare-sensitive passengers, cargo customers will pay a premium for the expedited and flexible point-to-point service afforded by an airline’s network.
Several factors affect just how much cargo an airline can fit on board: the type of aircraft, that aircraft’s tonnage capacity and available hold space, the weight of the fuel required for the flihgt and the space taken up by extra fuel storage, the weight of the mail the airline is committed to carry, and our luggage. Airlines ensure there’s weight capacity available for that profitable cargo by reducing the constant: the fixed weight load the aircraft with all its components and by managing luggage allowances.
Fuel consumption is more about efficiency than weight alone.
Fuel is very costly for airlines, but even reducing the weight of components on older aircraft to the bare minimum yields marginal benefits compared to newer aircraft models. A lighter plane reduces fuel consumption, but the best way to reduce fuel costs is to buy newer more efficient aircraft which suit the airline’s capacity needs for passengers and cargo.
Take what Airbus says of its new A350XWB:
“Airbus’ highly-efficient A350 XWB is designed to enhance revenue potential for operators in all market segments. In addition to a high-capacity cabin that maximizes passenger revenue, the A350 XWB’s lower deck provides ample space for baggage and money-generating cargo.”
Airbus also details how the aircraft accommodates both passengers:.
“The A350 XWB Family’s longest-fuselage member – the A350-1000 – can transport 21 tonnes of volumetric cargo and up to 31.3 tonnes of structural cargo, along with its passenger load in a typical two-class configuration. The mid-sized A350-900’s cargo capability is 16.6 tonnes volumetric and 24.5 tonnes structural (in addition to the passenger load); and the shorter-fuselage A350-800 version has a cargo capacity of 13 volumetric tonnes and 19 structural tonnes while also carrying main deck passengers in the two-class configuration.”
Optimized Cabin Design
Airlines work hard to ensure that the fixed weight and volume of the aircraft are as light as possible and consider the revenue-use of the square footage and revenue-yield of the weight in the aircraft.
It’s a big job. Airlines choose to use the square footage in the limited cabin space available differently, according to their marketing strategy and business model. Some try to get every square foot to yield revenue. Think of Spirit Airlines using the lids on luggage bins as advertising space (something Ryanair did first). Those advertisements, though thin, add weight to the cabin.
Because it’s revenue weight–it’s worth it.
Airlines don’t always make weight decisions on capacity alone. Southwest and Ryanair switched over from lighter fabric covers to heavier leather covers in their interiors because the leather covers reduced maintenance costs and didn’t need to be replaced as often. Weightier cabin components can be justified, if they contribute to the bottom line in a different way.
Some carriers provide an up-scale product, with enhanced cabin features, because they can charge higher fares per seat. Those airlines (Etihad is probably the most recent extreme example) still have to consider revenue square footage and the revenue impact of that total weight from the components installed. Weight impact and non-revenue square footage impact are measured for all cabin components even trim and finish (the textiles and decorative elements).
Because cabin components represent a permanent weight and space burden, a mistake in judging the profitable lay-out of the cabin, and use of the aircraft volume, can cost airlines dearly. With a three- to five-year window for a cabin configuration change, airlines can’t just swap-out unprofitable configurations when they discover that they’ve got it wrong.
Even fitting the A350 XWB with the most light-weight seat in the market (currently rated at 4 Kilos/8.82 lbs), would represent a total weight burden to the aircraft of 1.2 Metric Tons at the minimum seating capacity of 276 passengers. A more realistic weight for most of the “lightest” seats out there, once equipped with all the bells and whistles (without including the weight of IFE) is around 12 Kilos (26.45 Pounds). Even light IFE options may add up to 2 Kilos (4.41 lbs) to that figure.
These are Economy seat weights. Business Class Lay-Flat Seats and First Class Suites are many times heavier. The weight and footprint of seating (and all the things that go into or on the seats) is one of key interiors considerations airlines make, but not the only cabin component airlines must measure. There are cabin elements to consider like the insulation and cabin walls, the toilets, the galleys, the luggage bins. Then there is the variable in-service weight of “soft products” like any food and beverage onboard, the in-flight magazines, the blankets, the pillows—you name it.
Both Airbus and Boeing have introduced larger-capacity bins on their aircraft, but the larger capacity bins may not be a strong selling point to all airlines in all routes—that’s why they’re an option. Bin space in the cabin also adds unplanned weight to the flight, reducing the cargo shipments which can be accepted at the last minute. This can represent lost sales opportunities for the cargo divisions of airlines. Larger bins, like Business Class and First Class seats, become a passenger-enhancement feature—dependent on the airline’s marketing strategy. Where they are useful to the profitability of the aircraft, is that they allow for sufficient bin space for aircraft designed for higher-density passenger seating.
Passengers Vs. Cargo, by the numbers
Once the fixed cabin weight is optimized, airlines have to optimize both their passenger loads and cargo loads to make a profit. These two can be at odds.
Passengers represent a net profit margin of $6.00 each to airlines. Using the median weight of a person at the world average of 62 Kilos (136.7 lbs), then adding the average approved weight for carry-on luggage of 23 Kilos (50.71 lbs), the average person who only travels with carryon luggage represents a weight burden of 85 kilos (187.39 lbs).
According to IATA’s most recent report, current global air freight yields $2.40 per kilo. The average passenger with traveling only with average carry-on luggage can represent a cargo-yield loss of $204 to the an airline—hardly a good exchange for those $6.00 of profit per seat.
Each carrier, according to its branding strategy, business model, and even according to a particular route, will have to sell around 80% of its seats to break even. IATA states the 2014 average at 80.4%, but this can vary. Airlines know these metrics and design their cabins accordingly, leaving available cargo capacity.
To be profitable, airlines have to get the right amount of those $6.00 passengers in the cabin, without losing the opportunity to earn as much of that $2.40 per Kilo yield as they can store their cargo holds. This also drives the baggage allowance airlines make for passengers and the fees airlines charge for excess baggage.
Think of baggage charges as a cargo-offset, making up for lost freight revenue. A $35 charge by an airline for a second bag on board might seem like a lot, an overweight charge between $100-$200 might seem even more punitive, but with the approved weight of a bag at 50 lbs/23 Kilos, it’s equitable. Since an airline might lose an opportunity to carry rush cargo at a higher billing rate to accommodate an overweight bag, the overweight charges are easier to understand.
Cargo load considerations are nothing new.
Airlines have long benefited from optimizing capacity for a revenue mix between passengers and cargo.
Take American Airlines, which advertises it is “one of the largest cargo networks in the world,” and tells potential shippers:
“American Airlines offers cargo service on virtually every flight we operate. Each week, we can carry more than 100 million pounds of cargo — including perishable foods, pharmaceuticals, flowers, automotive and machine parts, international mail, live animals and other general freight — to destinations around the globe.”
Despite its significant global network, American Airlines competes with its peers for that cargo profit. It’s an important portion of revenue for airlines around the world. Airlines in the Gulf region, for example, capitalize on their network in beneficial trade routes. As Emirates, points out:
“With Dubai as our hub, we’re uniquely placed to help you do business faster and more efficiently. From our strategic location at the crossroads of Europe, Africa and Asia – you can reach more than one and a half billion customers in less than eight hours.”
Airlines also have dedicated cargo service operations and purchase aircraft wholly dedicated to freight on routes where there is highest demand. But, as American Airlines states, cargo is onboard virtually every passenger flight around the world today.
Capacity management is just good business.
With an industry-average return on capital reported by IATA at 5.4%, the gains to airlines of what they spend on those new more efficient aircraft and their new cabins are still weak (though better than the 3.7% in 2012 and 4.4% in 2013). The average net profit margin projection for 2014, reported by IATA at 2.4% shows that airlines really do need to measure every inch and every pound, every comfort and every feature carefully.
Even the leanest cabins are tons of weight airlines will not want to carry, unless doing so will turn a profit. A push to reduce the weight of cabin components has been an industry constant, long before the recent spike in fuel prices. Even if fuel prices dropped, airlines would still need to keep the weight of their cabins as low as possible, leaving room to carry that profitable cargo.
Marisa Garcia has worked in aviation since 1994, spending 16 years on the design and manufacturing of cabin interiors and cabin safety equipment. She shares insights gained from this experience on Flight Chic and Tweets as @designerjet.