Why Long-Haul Low-Cost Airlines Always Go Bankrupt
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- เผยแพร่เมื่อ 2 ธ.ค. 2020
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Writing by Sam Denby
Research by Sam Denby and Tristan Purdy
Editing by Alexander Williard
Animation by Josh Sherrington
Sound by Graham Haerther
Thumbnail by Simon Buckmaster
Select footage courtesy the AP Archive
"what's the secret sauce to a profitable long-haul low-cost airline?"
certainly not Newark Airport
Or London Stanstead 🙄
HAI joke 😂
I'm so glad my home airport gets some attention. Bad or good attention I don't care as long as it's being said 😂
Seems like the Secret Sauce is comeing out from Germany (TUI, Condor, and Eurowings)
August of last year - while waiting for an SAS flight to Scandinavia at Newark, a thunderstorm blew in and raged overhead for over an hour. Drip, drip, drip, from the ceiling. A seam opens up. More water. Then the seam lengthens and widens. By the time we were about to board, it had become a torrent rivaling the indoor waterfall at Changi - if not in beauty, at least in volume.
Editor: "Vaccines seem big at the moment, maybe we do that?"
Sam, scratching his arm till it bleeds: "WE HAVEN'T DONE A PLANE VIDEO FOR LIKE THREE WEEKS"
haha
Don't worry, we'll soon get the logistics of transporting a vaccine at -90° to the middle of the Sahara by aircraft.
@@bluemountain4181 answer: liquid nitrogen.
@@bluemountain4181 it's already done... The Logistics of the Covid-19 Vaccine.
I thought your W icon was from the defunct WOW Air.
"stimulate demand on routes with low demand*
Low cost, long haul airlines: opens Pyongyang to Washington DC route
would legitimately work if americans werent banned from the DPRK.
If you partner up with that pyramid hotel…
do Pyongyang to the Falkland Islands
Pyongyang to Kangerlussuaq via (N)ewark
Also the longer a flight is the more comfort matters. People are willing to put up with cramped seats for a 40 minute flight. But not really for a 300 minute flight.
I can't speak to other long haul low cost carriers but I preferred to fly Norwegian across the Atlantic because they had new planes with larger economy seats than those on legacy carriers' 777s. They made their money on add-ons.
@@spencerdavis1853The legacies generally have pretty meh economy seats on their 777s. I'm 6'8, and flying from AMS to ACC with KLM in Economy was NOT fun.
You nailed it. I use Frontier for day trips on the East Coast. I can get out of town for the cost of a tank of gas and the flights are short. I couldn’t do those seats for an international or transcontinental flight.
@@albertosaurusrex6854 To be fair, if you're 6'8 there are almost no airlines that are comfortable in economy. I'm 6'4 and I have never flown with an airline where I had space to stretch my legs. The worst was Scoot airlines tho, a nightmare for tall people.
I'd put up with it for 5 hours since I've done economy for 16 hours
Death, taxes and *Wendover plane videos* .
Omgg 😂😂😂😂
of which you cannot escape/
All inevitable 😂 like what ya did there
@@iniesta8856 gg4 ;:%%-
Wendover videos are MUCH MORE PLEASANT THAN THE OTHER TWO
TUI are really just a package holiday company that sell tickets on their flights as a secondary revenue stream.
Condor does the same, even though they do not belong to a package holiday company anymore.
@@TheRafftnix They were many years owned be Thomas Cook. When they got bankrupt, Condor survived with the help of the German State and are now completely reorganised an own company.
Yep they are creating demand by putting together package holidays to locations other airlines don’t serve.
well creating package holidays is one the best ways to be successful in the long haul - budget market. The whole package part is what allows you to fly destinations with barely any demand and still get away with it. Some other long haul budget airlines succeed without the help of package holidays, and it is possible. But it keeps you floating
th-cam.com/video/tHl2WGFHFGA/w-d-xo.html
I'm so sad wow air went out of business. The cost to go to Amsterdam is now 2.5x what is used to be... I didn't know how good I had it back then.
Wait you're alive!! Bro I miss your r6 vids even though I don't play r6 anymore.
Yep. It's like when Air Asia X pulled out of Europe. London to Perth via KL for under £300? Happy days...
1M subs but not verified?
flights to China are 10* more expansive now
Wow
Make a "why Wendover would go bankrupt without airlines" for April fools
The insane logistics of a Wendover video
Norwegian Air: "OH NO IM GOING BANKRUPT HELP"
Wow air: "first time?"
Congratulations 🎉👏 of being the top comment 👍😁 (as of now 😈)
Norwegian government: sit tight, Daddy is here. NOW GO BACK TO YOUR ROOM AND THINK WHAT YOU HAVE DONE (restructure)
@@AaronShenghao Norwegian was recently denied money from the Norwegian authorities.
Poor Norwegian bet wrong... we got a 737-MAX - grounded on crashes and 787-8 - was grounded on Lithum fire for a while... my last 4 Norwegian flights were on charter 777's
I wonder if Norwegian's poor customer experience is an additional punch in the gut. The only time I flew Norwegian I had a horrible experience and ended up switching back to a regular cost long haul carrier. They're sort of known for their terrible customer experience, at least here in the US. To me at least, the cost between the two wasn't _that_ different from one another after all additional costs were put in. In the age of COVID, I feel (completely based on anecdotal reasons) that the biggest group of long haul customers are business or people who can afford more in their routine flight plans and thus would be more likely to go for other airlines like Delta or United who may provide even marginally better comforts.
this was better than some of my business school classes in university
Anything is better than business school classes
This was better than some of my classes for air traffic control.
Ikr
Probably because you didn’t really learn anything
Never expected to see u here bruh
Be careful with outliers: the # of hubs correlation is almost entirely generated by the single outlier with high leverage on the right (4:30). Removing this single data point as a robustness check , the R-squared drops to 0.006, signaling that the correlation is pretty much entirely dependent on this single outlier.
That would be TUI, on which a lot of his arguments seem to be based
Looking at the other two regression lines with significant R-squared values it also looks like there's an outlier that might have an important impact on the correlation no?
Correlation cannot be taken seriously for such a small sample size in the first place.
@@davidhildebrandt7812also they fly 2 or 3 times a week from all those cities, and not just banking on one hub, during the high season, making sure their planes are full each way. They also have vacation packages tied to flights enabling them to have certainty as to who’s flying and they can up gauge whenever there is more demand by their network of tour groups throughout Europe. The other low cost long haul airlines can’t beat that certainty instead they have to run almost daily flights like their legacy competitors and fly to the same airports as them.
As a Canadian we all know Westjet is not a low cost longhaul Airline, its literally the same prices as the legacy carrier Air Canada
Yeah, I feel like Air Transat would have been a much better candidate for this video.
Wasn't it a low-cost airline in the past? Or is Air Canada a premium Airline?
@@TheEDFLegacy yea like over 15 years ago, now they are just an alternative to Air Canada by name and nothing else
Sunwing would be better known
I never fly air canada for some reason
"but....but this time it's different" - every airline founder a couple of years before they go bankrupt
Watch out for Vaas; he’ll enslave your ass!
How to make a small fortune in aviation? Start out with a LARGE fortune... :(
The easiest way to become a millionaire is to be a billionaire and start an airline.
The easiest way to make a small fortune in roleplaying games is to start with a large fortune (is another variation I've heard)
@@vincentmuyo -- I heard the aviation version of it MANY years before I even heard of a "roleplaying game"... I'm I'm even counting D&D in the "roleplaying game" category, even though I have no idea how someone could event *try* to monetize that sort of thing from the D&D geeks...
Now this just feels like ancient history, a time where people could fly everywhere without worries.
"Dad what's an airplane?"
"Let me tell you about before the dark times"
Don't even say that man, don't accept this new normal
Bro stop being such a baby, I went on a flight two weeks ago it’s no big deal
@@Pyrus425 which country to are from and you shoudnt do that
@@nguxred166 “you shouldn’t do that.” A country founded by rebels and now we’re afraid to test the waters of what we’re told. Pathetic, honestly
Great content.
One small mention about TUI and Condor.
The majority of their passengers buy those seats with a holiday package attached. TUI and Condor fly mostly as part of a holiday package and that's why they are the only company flying MUC-CUN(one exampe) direct in the middle of european winter.
Even though they sell tickets to the mass market, most of the plane is full of holidaymakers going to a warm place in winter.
"Hey Dad, tell us a scary story!"
"Norwegian Airlines."
MH17
@@TYDAI940nah, mh370 is scarier
Tower Air
It's actually Norwegian Air Shuttle, no such thing as Norwegian Airlines
11:55 OSL-BKK might be hindered by Russia refusing to allow Norweigian to overfly it's airspace though
Ok, TUI and Thomas Cook are/were NOT budget airlines, they are/were the airlines of two MAJOR european tour operators, hence their peculiar networks and low frequency of operations.
Exactly! And TCX airlines WAS profitable, the retail side wasn’t and it brought the entire company down. If it was just an airline, it would most likely still be operating
Azul is also hardly low cost too. They're pretty middle of the road price wise, and their have pretty good service and seat space, not like what you'd find in say Ryanair.
They may be on the cheap end of spectrum for average airlines, but they're not low cost
@@justastudent1423 Low cost means low cost structure as in the what the airline pays for, not what they charge you!! I can find cheaper flights on Delta Airlines sometimes compared to Southwest going to the same destination!
That is a good thread to pull on!!! What failed in that sense, the other portions of the tour company or the airline itself? Did Wendover just analyze the financial and operational factors of the airlines and how they performed? (I think yes). Finally did that matter for the success or failure of the airlines he mentioned (being tied to a tour operator)? Of note, Allegiant Air in the US, does not do so well and they follow the same model as TUI & Thomas Cook (low cost, tour oriented flying). Just some good, additional discussion points.
Big tour operators have been suffering with the rise of more DIY travellers and cheaper or better quality package holidays from smaller more specialised competitors. They did get a bit of a rebound this year as people who did go on holiday wanted to play it safe with their money, but looking forward I don't see the trend reversing. The days of people being happy being in a big resort hotel in the costa del sol or florida with a breakfast buffet and kids club are going away.
Tui / Condor aren't 'Long Haul Low Cost' airlines - they are charter/holiday airlines. There is a difference.
Same with Thomas Cook
But they basically work the same way.
its frequencies that makes different
less competitor on their route..and hey cheap price..it goes the same way..like condor flight from frankfurt i guess..to the small city in canada..seems stupid moves..but it works
@@richardschenk4058 Nope. Creating demand and Pricing work completely different.
Creating demand works different because for example TUI sells mostly holiday packages; they can go where the demand and can adjust accordingly. Package pricing is also a thing; reducing your profit margin on certain packages spreads risk.
Also, the profitability of the LongHaul Airline part is different: 1 day they can give you a big 'discount' on your ticket in the package and keep a lot in 'fees'; where on other days they can reduce fees while increasing the ticket in package. Where do you want the money to go: the airline part or booking part (or the hotel-part); that all has to do with tax of course.
Westjet is not even a LCC anymore they have gone premium too
As a Brazilian, I just appreciate how you pronounce "Recife"
Heh see fee
Engraçado é a Azul ser considerada "low-cost"
TUI (Tourism Union International) also doesn't just offer flights, they're invested in the tourism industry more broadly, they have travel agencies where they promote the destinations they fly to and offer deals on a combination of flight, accommodation, and activities (and nowadays they also offer them online). They manage to create demand for their flights this way, as well as getting a cut of the accommodation and activities booked trough them.
I was used to watch wendover videos on my way to the airport/at the airport, since publication aligned with my usual schedule. Since covid hit, being at the airport is nothing but depressing. I even miss those damn duty free shops. Watching this video right now from Vienna airport brings a unbelievable sense of normalcy back. Thank you from the bottom of my heart!
Vaccine probably will be available to everyone in June and they will start distributing it in a few weeks.
We have gone since March, so we r more than halfway to the finish line!!!
experts: "NO YOU CANT DO THAT ITS STUPID AND WILL LOSE MONEY!"
air asia x: "observe"
I'm baffled it would lose that much money though. Where does Tony Fernandes keep finding the money to cover the losses? I know this is a man who once personally owned an F1 team so he's hardly poor, but still, you can't keep losing around €100 million a year and remain solvent...
@@rjfaber1991 I'm guessing that its domestic network more than makes up for it. Apparently they've pushed out the flag carrier Malaysian Airlines, which has been struggling since even before COVID, and is now at Death's door. Furthermore, while they've avoided using the multi hub model, they've taken the presumably cheaper way (you avoid higher taxes by partnering with a local company) of creating local airlines under the banner in multiple countries. There were 7 AirAsias (I'm saying were because some have lapsed) and 2 additional AirAsia Xs.
@@rjfaber1991 It's the banks who are on the hook, not Tony. Air Asia X piggybacks on Air Asia and they do connections, so a lot of long-haul traffic end up feeding into short haul with KL as a hub. Asians are less wealthy than Europeans and they look much harder for the cheapest fares even if it takes significantly longer, as fares can be very high due to the much larger size of the continent. But the model doesn't work during a downturn because the first thing people do to save money is stop travelling, no matter how cheap the fares are.
AirAsia domestic routes are the money makers while AirAsia X burning money.
Considering that more than 10 years ago this is the same damn subsidiary company who "successfully" screwed up a government funded air services project for local people in Malaysia Borneo in less than 12 months, I am not surprised.
11:12 Well Malaysia Airlines (MAS) has rumours that it might be closed down given it's unprofitability. That'd remove a key competitor to AirAsiaX I think. Maybe the latter will be re-designated as Malaysia's new flag carrier (with MAS' resources e.g. A359s merged into it, perhaps boosting it's long-haul operations)? Since the 'regular' (i.e. short-haul) AirAsia had been profitable before the pandemic, unlike MAS (with Malaysia having less business travellers than, say, HK or Singapore, resulting in the remaining travellers in & out of Malaysia being more of leisure travellers who're more budget conscious)
Hello, Am from the Gambia, you literally made my day when you mentioned our one and only city Banjul.😁
One and only? Just saying I thought The Gambia has more than one city.
@@j.w.s.d7665 Nope.. only one. we are VERY small.
I’d never imagine seeing my city in a Wendover Productions video since it’s not a logistics or business hub by any means, and yet there Vitória is at 8:38. Made me miss home, cheers! Love your content!
Long-haul low-cost airlines: go bankrupt
Air Koryo, vibing: Sucks to be you 😎
LMAO
Wow. Your two comments showed up right next to each other.
That’s because people fly Air Koryo for its luxury
Best Korea wins every football match, every living standards award and most importantly, our glorious Best Korea airline Air Koryo wins everything.
Imagine if this was actually kim jong un.
Wendover: "You need a lot of data and regressions to understand the business model of airlines"
Azul: "Hold my Wikipedia page"
Dave Neeleman: "Been doing it since Morris Air."
In my language, Swedish, that page has a total of five sentences... their Portuguese page has plenty though as could be expected for a Brazilian airline
The reason Azul works is simple, they give you gummy sweets shaped like a plane
th-cam.com/video/tHl2WGFHFGA/w-d-xo.html
The fun thing is that Azul is actually the most expensive (in average) airline for domestic flights in Brazil.
Cebu Pacific basically turned the whole Philippine domestic aviation market to a wholly low cost market.
Wendover didn't take that into account. Out of all the airlines listed in the vid, CebuPac seems to be the only fully long haul, low cost airline. I'm guessing CebuPac has the domestic market supporting the long haul routes to avoid going under
In Germany we call this the "Air Berlin effect". But then again, we suck at building airports, so that might have contributed to the issue as well.
the airport in munich is quite nice imo. usually very quiet and clean
Naja, aus Deutschland ist ja Condor und TUI, alsoooo
#dankeTXL
Everything from Berlin goes nuts. Airlines, airports, debts, governments...oh wait!
@@geisterfahreruberholer2171 berlin ist nicht mal deutsch. Kenne ja gar keinen der da gerne wohnt
I just learned that you can do a regression with ten points only ... and that a R2 of 0,16 on a regression of 10 points is considered interesting/significant....
If you can reasonably assume that there is a linear relationship and you just want to figure out the coefficients, I don't see why you couldn't.
But in this case? Given the sponsor bit a the end this looks a lot like "I just (sort of) learned about (the absolute basics of) this thing, let's use it for ALL THE THINGS!"
Shoutout to R²=0.1439 (significant figures, anyone?) being "insignificant" but R²=0.1484 is considered relevant . . .
@@WIRRUZZZ haha yeah. And I was almost going to say : "EH NEXT TIME, USE 2 points of DATA, you will have an R2 of 1 :D !!!!"
@@WIRRUZZZ I thought the same (sponsor comment) because I'd been wondering why on earth he wasn't doing a multiple regression, then I noticed the sample size.
@@WIRRUZZZ Yea, the maths on this video were kinda suspicious. Also, no data source.
I mean, yeah it's certainly a very limited data-set, which is why I never declared a "conclusion" in the video, only a hypothesis (which is why I always say the data suggest, not the data say/tell us.) This was the largest data-set I could get though, as I took every low-cost carrier in the world (according to the ICAO's list of LCC's), narrowed that down to this with long-haul operations (flights over 2,400 nmi), then I narrowed that down further by excluding those without independent financial reporting (ones like Joon and LEVEL that have a parent company and are too small to be required to independently report) and that left me with these ten. So, yeah, it'd definitely be nicer if there was more data, but there just isn't.
My best guess is that the proportion of cost that fuel is gets higher the longer the route is, and if you take away amenities from those routes they are very slightly cheaper than others but a whole lot less bearable.
"What's the secret sauce?"
For Cebu Pacific, it's Filipinos. Lots and lots of overseas Filipinos travelling back and forth for the holidays.
Probably also because the Philippines in general is pretty underserved by other airlines and if they do, they tend to funnel into Manila.
Think most Filipinos don’t want to do connection flights in Manila and would rather land in their nearest airport which is where Cebu Pacific comes in 🤷♂️
Hope PAL or Cebu Pacific does a service from London to Clark since people from Northern Luzon really don’t like driving across Manila 😭
Video: A little Pilipino reference in one video
Filipinos: This is interesting, i'll comment something unrelated
gotta flex that pinoy fried somehow, eh?
4:29 Highest degree of correlation? These are R-squared values that might impress a sociologist.
Also, for the highest correlation variable (# of hubs, 4:30), remove the outlier on the right and the correlation all but disappears. An analysis of that variable hinges entirely on that single outlier, making it precarious at best.
(Also, while the audio talked about correlation, the statistic used was R-squared, so correlation squared.)
@@ae1ae2 I knew I'd find some stats nerds in the comments the second I saw those charts
@@ae1ae2 so are you saying his thesis was shoddy based on that lucky last datapoint? Whos to say that wasnt the trend...
Not challenging you, I just like hearing you guys talk statistics in my ear ;)
Well all the other correlations have even lower R^2 values, so he isn't wrong, but it's a pretty low bar to set
Me: Well, time to take a break from studying econometrics and statistics
Sam: LOOK AT THESE REGRESSIONS
But regressions are fun :)
@@Dayvit78 Yea but no sources? Suspicious, that data is not usually publicly available
th-cam.com/video/tHl2WGFHFGA/w-d-xo.html
Wendover, I love, love, *love* all these thumbnails of videos you make that make it look like a package, a box, a hull, an outer shell or an inner part of a video as if it was an industrially produced physical commercial product. My industrialist nerd self really appreciates the effort you put into them. Thank you for making my days brighter every time I see one of those unmistakeable thumbnails. I always take a few seconds just to look at it and appreciate the effort put into small details like screws, scratches, rust, shadows, wrinkles, codes and icons, etc. If you're not making them yourself, I'd looove to meet your thumbnail artist one day. They're a genius and I want to marry them.
Nobody:
Wendover productions: “the numbers mason, what do they mean?”
LMAO
I've flown Condor many times going to Germany, and one of the main reasons I picked them was that they operated a non-stop flight from Phoenix to Frankfurt, which no other airline offered. Every other flight had at least one stop.
the flight is back now
just finished my statistics course homework: Starts laughing correlationately
th-cam.com/video/tHl2WGFHFGA/w-d-xo.html
“The data shows...” r squared is .16 lol
What a class! I started following your channel to keep up with interesting topics in aviation but Every time there’s a new video I learn a lot. Thanks for this amazing content!
That's quite a bunch of Apple charts, no label no units... But you know it's fashion they say
"Apple charts" XD
That's great. I'm keeping that.
Azul has a VERY strong short haul operation in Brazil. The strategy is bringing PAX from cities that doesn’t have direct flights to full the long haul flights. That way they can charge more than the other airlines that doesn’t give this option.
KLM does that too
This was actually one of the factors I looked at because I was wondering whether to have a successful long-haul unit a low-cost long-haul carrier would also need a short-haul one for feeder traffic. Quite a lot of people in the industry seem to think that's part of the magic, but the nature of connecting itineraries is that they're revenue-diluting. You have to charge less than an equivalent non-stop flight because passenger view non-stop as a premium, meaning an airline earns less money. Simultaneously, connecting itineraries cost more to operate because airlines have to operate two flights (or more) meaning two sets of landing fees, two sets of baggage handlers, two sets of gates, more fuel cost, more opportunity cost with using airplanes for longer, etc.
However, to test this out, I used the ratio of long-haul to short-haul aircraft in a given airline's fleet to act as an indicator of what the ratio of long-haul to short-haul operations is for them. Azul, for example, had a pretty small ratio of 0.085 since they have such a strong short-haul operation, and they were only beat out by Eurowings and WestJet. In the end, there was a slight negative correlation between LH to SH fleet ratio and profitability, meaning low-cost long-haul airlines with a higher proportion of short-haul operations did a little better financially, but the correlation was quite low, so it couldn't be considered statistically significant and, even if it was, the negative correlation was quite low. So, TLDR, the jury's still out on whether low-cost airlines need lots of short-haul to make long-haul work.
I used to work with WOW Air (JFK to KEF). It was a seasonal operation, for summer 2018. It didn’t take long for Wow to end operating.
"Westjet is long-haul low-cost"
Every Canadian: *doubt*
WestJet flies multiple 787's from Canada to Europe, that's pretty long-haul. But they aren't low-cost, that's for sure.
Nothing in Canada is cheap
@@aidanbazan7769 honestly I wouldn't consider TUI Airways or Condor truly low-cost either
@@jakubondrus6064 Thomas Cook was the same as the TUI airlines. Not low cost
They started out low-cost compared to Air Canada, but now those 2 airlines just match each other's pricing.
FOR THE LAST TIME, WestJet is NOT a low-cost airline. they are always on par with Air Canada, which is never considered a budget airline.
Damn, never seen a Canadian that angry before
@@AmazingAmigo he might not be canadian
I GET SO MAD ABOUT THIS... Westjet is expensive with low cost features (yes Canada sucks with airlines)
their 737s don't even have IFEs idk if you can consider that not budget
Lol this cornball acts like he's been saying this to Bendover for years... corn.
Although I'm not a big fan of sponsors, I need to admit that I really liked how he showed us with all those graphs and correlations what he learned with Brilliant. You got me there, Sam.
On October 2019 he released the video “why so many airlines are going bankrupt” in which said AirAsia X was one of the only profitable low cost-long haul airlines
ironic
@seeriu ciihy he’s mentioned wendover a few times in HAI videos
Yes he say that air asia is profitable in that other video
AirAsia is profitable, AirAsia X was never if I recall correctly
@@darryldeed it is know bankrupt
Overall great video, however WestJet in particular nowadays is considered a full service legacy airline as prices, amenities and many routes are now the same as with Air Canada. WestJet’s low cost subsidiary is Swoop.
“and do it with the 737max!” said the boardroom
yeah how did that work out?
Still safer than driving, I believe.
Something that he doesn't mention but i think has quite an impact is that several of these airlines like TUI and condor also have touroperators so they create even more demand and not just with the routes
Excellent. I remember when Ryanair started to fly from Kaunas to Eilat, suddenly everyone around me decided they want to visit Eilat. Pretty sure most did not know where Eilat is week before. When Ryanair started to fly from Vilnius to Amman, suddenly everyone decided they like Jordan and want to visit it. When Wizzair started to fly from Riga to Kutaisi, all the travelling jetset decided that this is the “go-to” place. When I travelled to Brazil, I could have fly London - Rio with Norwegian, but chose British Airway, because the price was the same and I like BA. When I wanted to fly to Brazil again, I chose Condor, because price wasn’t that cheap, but they were the only ones who had direct flights from Germany to Brazilian Northeast where I wanted to get to. So this totally makes sense to me.
I loved that you included some regression analysis'! They are so powerful and so easy to use. I'm doing my minor in business analytics rn and we do this stuff all the time and it's so fun.
This is such a nerdy thing to say, I love it
Finally, a plane video! I was beginning to sense something was wrong.
I think he was captured by the fbi
me too!
It's only been a month (2 videos) 🤭
@Brayden Rothe When you’re obsessed with dragging airplanes into every video you possibly can and you don’t make a video about it for a span of more than 1 video, something is wrong.
@@shivpatel7506 you got me
What's interesting is that whenever I play Airline Empires (a web-based airline business simulation), I run into a similar problem: All of the trunk routes between major city pairs get clogged up with flights from competitors, which makes it hard to turn a profit on those routes. So, the strategy I prefer to use is to fly low frequencies between small and medium size city pairs (like Oakland, CA to Buffalo, NY). Since these routes have little competition, turning a profit is much easier. It's fascinating to see that the principles of my game strategy are actually applicable in the real world.
Thanks Wendover, always very insightful content. I work in aviation business development (traffic/network development) with a major airport in the Middle East. It would be great to watch a video on the work of airport network teams, how we work to influence airline network planning teams to open new routes, how airport aviation teams support airline network planning teams to assess unserved/underserved markets, and the importance of aligning local stakeholders (local corporates, travel agents, embassies, ministry of tourism, chambers of commerce, etc.) in joining forces to pitch new routes to airlines (also through incentives).
This channel provides better documentaries than most big channels I have ever seen
Why not use multiple regressions? And are there not too few data points with too low correlations for any of them to be significant? What were the p-values for the different regressions?
“if you torture the data long enough, it will confess to anything”
@@alessio622 this does not quite apply here. He is asking for values that determine the significance of the shown data regressions
Yes I wonder whether any of the factors were correlated with each other - you'd test for that with Variance Inflation Factors
@@Beerfazz true
Problem is that they're doing statistics with the goal of getting "top 3 correlations" for a video. Also I think the "number of hubs" correlation might partially just come from the fact that there's no very large companies with very small numbers of hubs (unless they adjusted by doing profit compared to the size of the company).
P values for the r^2s around 0.15 are something like 0.25-0.3. (There's ten crosses and they've given you the r^2 -> n and r -> p value.)
Additional thoughts on Cebu Pacific: I'd say that they aren't really a true long haul low cost airline. Much of their profitability is derived from their strong position in the domestic (and some intra Asia) flights. Some CAPA analyses from before (if I remember correctly) have actually found that their long haul routes such as MNL to DXB lose out significantly. Their widebody fleet is more often used to increase capacity on super high demand routes such as MNL-HKG and MNL-SIN.
To be fair, one long haul route that they seemed to be doing fine in was MNL-SYD. Though idk how that route is doing nowadays.
Their tickets are too expensive for the shitty offering they have. Just a bit cheaper than full services airlines on some routes. And usually the most expensive "low cost" option.
High Demand Domestic Routes
MNL - BKK
MNL - HKG
MNL - SG
High Demand Domestic Routes
MNL - CEB
MNL - DVO
also, filipinos are cheap af
The mnl-dxb route it more about a legacy play. OFWs use to return home and if you live south of luzon island that’s not cebu or davao. You can get cheaper fairs to go home.
Ditto with WestJet, Canadian domestic flights fund their operations.
Low-cost means the customers believe that they can reduce the cost by renouncing some services.
It works for short haul since you can go on a quick city-break with a light luggage, you can squeeze a little more for a 1-2 hour flight. or skip in-flight snack.
Please do more of these videos! Although yes, they 'only' use secondary data and use only readily available information, they are still very insightful and do bring meaningful conclusions - at least from a qualitative prospective.
Finally, An airplane video. Welcome back, everyone
th-cam.com/video/tHl2WGFHFGA/w-d-xo.html
"Low competition routes mean profitability"
Westjet, one of only 2 major airlines to fly domestic in Canada: *Heavy Breathing*
Air Transat, West Jet, and Air Canada are all major airlines. Although its true that after that they become a lot less... major.
Other airlines simply aren't allowed to compete between Canadian cities. And every time Canada gets a 3rd airline, the competition squeezes them out.
@@aidanbazan7769 Transat only competes on vacation destinations. They really don't compete in Western Canada, nor do they compete in the Domestic and Transborder markets.
4:31 one problem is that an R^2 this small does not say anything. There is real no correlation even an R^2 of 0.36 is considered to small
The quality of this video is amazing. Thank you for the great work.
RealLifeLore: makes a video about planes
Wendover: *oh boy, I'll show you who's boss*
This is so true all my flights so far have been short haul in Europe and i have chosen cities/countries based on the price of the flight to that airport. Cheaper flight = More money for holiday.
Wow this is your best video, really good info presented clearly with enough evidence to back it up.
Fascinating video. Loved the use of statistical analysis to find the most correlated variables
Glad to hear Cebu Pacific get a mention.
Why are you proud that your airline is approaching bankruptcy?
@@TheGamingAlong Eh? They are one of the ones in profit.....
"Norwegian is deeply in red " I see what you did there
Literally missed the opportunity to say Norwegian is nose deep in the red
@@iamtheman78 they have callsign Rednose :D
Thank you so much ,I was just about to start one listening to my friends advice.
Scoot does short-haul low-cost flying too, after TigerAir in Singapore was merged into it in 2017 (it's Australian & Taiwanese subsidiaries were sold to VA & China Airlines respectively IIRC, who continue to retain it's original branding). Also Scoot might be relatively more financially secure as it's under SIA, with it's financial backing, & their low-cost & full-service flights respectively are also more co-ordinated, reducing canibilisation of each other's markets for flight routes e.g. Scoot flies from SIN to numerous smaller cities not (or formerly) served by SIA e.g. Nanjing
Since subscribing to Wendover, I’ve learned so much about airlines that I never knew before.
Very insightful video! Just a remark on the 'number of hubs' regression: It seems like TUI is a big outlier there, being quite successful and having 18 hubs. Looks like if you remove TUI as an outlier, the correlation wouldn't be there anymore. So I'd be skeptical about the conclusion that that per se plays an important role.
Thinking about it, more hubs of course enable more uncontested routes so that might just be reason for how it enables the other two effects?
ya sorry a ~35% R^2 is not strong enough to draw any conclusions
But then that would be boring and there would be nothing to discuss
Always looking forward for amazi g videos from wendover. Cant get enough. Superb work guys
I’m still waiting for you to start your own airline - wendover airlines.
Haha love your videos though, as they inspired me to start my own channel.
Wendover promoting brilliant: They take these incredibly complex above-college-level topics and boil them down into learnable modules
Wendover promoting brillinant also: Shows b-roll footage of how to calculate averages
Wendover: Brilliant takes these incredibly complex above-college-level topics and boils them down into learnable modules.
Also Wendover: takes these incredibly complex topics and boils them down into learnable modules.
I work for westjet out of Toronto and this is spot on!
I love your videos. They are always very descriptive and high in human interest.
Joon wasn't a LCC, it was an AF subsidiary whose business model never really made sense and so it was pulled during a restructure
Wendover: Why Long-Haul Low-Cost Airlines Always Go Bankrupt
Air Koryo: Am I a joke to you?
I recently revealed the genders of my two girlfriends. It got a lot of hate and now has 30 times more dislikes than likes. I am really sad that people can be so mean. Sorry for using your comment to talk about my problems, dear shib
Air Koryo is owned by n.Korea gov not private so it’s subsidised
But he explains that there are a few that were returning profits right in the beggining od the video though.
@@AxxLAfriku bruh
yes.
One thing that should be considered with someone like Tui, (and you touched on this with the demand section) is they operate routes that serve the hotels that they offer as destinations... You can package holiday with them for cheaper than if you did it all yourself... When I flew to Cancun with them on holiday, over 3/4 of the passengers got straight onto coaches to be bussed to their hotel. For many people (including me) the convenience of having one person handling the flights, transfers, hotels and back again is something that is just convenient...
I totally agree, Neos, a small liner company in Italy "born by Tui" and one of the few profitable here, work in the same way, few fly weekly and for tourist/low demand area
I fail to see why Westjet is classified as a LCC.
It used to be, but it’s not anymore. It’s since transitioned into a full service carrier, like Air Canada (but better).
Plenty of the "LCC"'s on his list don't really fit that definition.
While they aren't legacy airlines, very few of them fit the Ryan air or Southwest model.
Winnipeg to Toronto with WestJet: $368. Air Canada: $278. They stopped being LCC before they started flying
@@nathanabercrombie6116 Well I'm not sure where you're getting your prices, WestJet matches Air Canada on most routes.
And given the choice, I would fly WestJet every time.
Is it only because Canada is really big? Because, well, we are, but WestJet does plenty of short-haul domestic and international flights too. I'd sooner say WestJet's success is down to a diverse business model. If one type of route starts dying, they aren't completely screwed (like, say, heavy international travel restrictions during a pandemic...).
I'm normally a great fan of your videos, but I do not believe the statistical analyses you provided are strong enough to draw your conclusions. There are very few data points, and as you could see with the 'number of hubs' variable, taking away the outlier on the upper right corner of the graph would drastically alter your analysis. Similarly, one must wonder, if we were able to include more airlines, how would the regression coefficient change?
I flew once with Laker! Ryanair is my favourite airline. It operates a flying bus service from a local airport to where I want to go to. No frills so no disappointments.
Sam, I have read in a couple of news outlets that Volaris and Vivaaerobus seem to be on track to almost full recover in terms of pre-covid 19 schedules and a clear path to profitability in the horizon. Maybe you can look into those and share with us your insights. Great video!
6:30 ... Have I been saying antithesis wrong?? 👀😬
Yes. It's not Anti-thesis, because english is a stupid horrible language. Ant -ithe-sis is closer to the pronunciation, but Sam probably overly emphasises the Ant though
@@Hevlikn yes English is wierd
Though
Thought
Hiccoughs
Plough
Rough
.. yw
Sam pronounced it correctly.
Jason Chen unlike the word route, which he pronounced incorrectly about 400 times! 😜
@@IIDave Both /ɹuːt/ and /ɹaʊt/ are correct pronunciations
Would really love to hear your analysis on how Cebu Pacific profits so much despite being on the opposite end of the graph (i.e. number if hubs and number of route competition). It would seem that they stand as a signifact outlier to the aforementioned correlations.
i think it is because Cebu Pacific succeeds in domestic routes. They have pretty much conquered the Philippine domestic travels and basically mastered it before jumping over to long hauls.
Super awesome that you essentially did your own research and study, and came up with novel findings, to produce this video. Guerrilla academia :)
I went into this video expecting to be bored.
I can now happily report that I was engaged all the way to the end. You did an amazing job on this video.
You had separate R-squared values for each metric which indicates to me that you ran separate regressions for each metric. Considering the sample of airlines is low it probably would have been better to utilise multiple regression. You can then use the p-values to determines statistical significance of each metric's effect on profit. It probably would have yielded similar results, but the overall statistical significance (chi-squared) and predictive power (R-squared) of the model would be stronger.
5:12 As someone who has a lot to in Uni with statistics, it has the highest correlation, but it’s because of some airlines having unusually high number of hubs. In this example the TUI. To prevent this from painting a false image, there are some statistic measures (can’t really explain them in English tbh, not my native language) to prevent that happening
Can you say what are those in statistical measures to search and learn more about to them please
Had the same thought as well. The airline with 18 hubs is clearly a "leverage point" which heavily influences the correlation. If you remove it, the fitted line becomes a lot flatter and statistical significance would drop a lot.
@@podemosllegara680anti-tikt6 A year late, but see my previous answer :)
To be honest, man, your thumbnail pictures are ace. You don't use those shabby reaction faces and it's still hella interesting. Real quality content here.
I'm glad that you mentioned JetStar, but I really wanted to hear more about why JetStar is doing well. It is actually quite a unique business model, especially since it offers a business class service. Although it is more like premium economy on other routes, I think they have managed to offer a premium service for a decent price, which also attracts a small portion of the business market as well (mainly SMEs) as well as the tourism market with people that have a few extra dollars to spend for a premium experience, but don't want to spend crazy amounts on business class on other airlines. They also fly long-haul but have Asian-based subsidiaries in many countries that offer short-haul international flights (without the premium business class product). I think they have managed to create an extensive route map around Asia and Australia, while tailoring the product offered on different routes to cater to the markets there.
There are only 3 Airlines that fly domestic in Australia, Qantas, Virgin Australia and Jetstar, Qantas and Virgin Australia are more traditional airlines and Jetstar is the only budget airline in Australia and is owned by Qantas not to mention long distance rail in Australia is a joke meaning Jetstar has little to no competition
12:01 Holy balls. I went on a flight from Ft. Lauderdale to COPENHAGEN with Norwegian. It was for a cruise. Guess what one of the stops was? Yeah, Oslo!
I find it funny that Azul has also flights to Fort Lauderdale, while no Brazilian airline to date has direct flights to California.
R^2 isn't really the best way to determine if two variables are correlated. Are any of these correlations actually statistically significant at say a confidence level of 95%?
Revisiting this video after a few years. It's interesting to see how Breeze airways has taken the creating demand strategy domestically. No surprise since it was founded by the same guy that founded Azul.
OK, I want more of these obscure aviation stats. This is insanely entertaining, for realz!