You might think a full flight equals profitability, but that's not how it works. That full flight might be bleeding red ink.
This week, United announced that it would cancel its flight from Newark to Istanbul. After telling someone about it, the reaction was incredibly common… "But it was full when I flew it, so I'm surprised." You might think a full flight equals profitability, but that's not how it works. That full flight might be bleeding red ink.
You're probably wondering why an airline would bother selling a planeload of seats below the cost to carry people, and there's a good reason. The airline doesn't think it will have to do that when it schedules a flight, but the airline doesn't always guess correctly.
It starts in the planning department where decisions are made about which flights to fly and when. Planners look at available data and then make the best decisions they can, but it's not perfect data. And decisions have to be made pretty far in advance. You can't schedule a flight for tomorrow, because if you do, there won't be enough time to sell the seats.
So the planning team puts a flight out there, and there are a number of seats that need to be sold. In the case of the Istanbul flight, there were 30 business class seats and 184 coach seats that needed to be sold on every flight.
At this point, the costs are locked in, so it's not the revenue management team's job to only sell seats above cost. They would only do that if they had the option to cancel the flight at the last minute if it didn't sell well enough. (They won't do that.) Instead, it's their job to maximize the amount of revenue they can get on that airplane knowing that once they get within a couple months of travel, it's going no matter what.
Ideally, the revenue management team is able to sell seats at a level that ensures a profit on that flight, but sometimes that doesn't happen. In the early days, airlines usually have more tolerance for losses because they expect the market to build over time into a winner. But at a certain point, they come to the realization that a market just won't work, and they cut the flight. In this case, the decision easier because United can continue to fly its passengers to Istanbul via its partner airlines.
That is almost certainly what we're seeing happen here in Istanbul, though there is one other possibility. It takes 23 hours to get an airplane from Newark to Istanbul and back. There are a lot of other things an airline can do with that airplane, so there is a chance that United decided that it could make more money putting that plane on a different route. But I doubt that's what we're seeing here.
Instead, this looks like a route that seemed promising but hasn't performed. Even if it was full, it wasn't generating enough revenue to keep it flying. And that happens far more often that you'd imagine.
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