Why Europeans Put Bigger Planes on Trans-Atlantic Flights
The days when flying over the Atlantic automatically meant a seat on a two-aisle jumbo jet are over. U.S. carriers have switched many ocean-crossing flights to slender Boeing 757s, a smaller airplane than the typical wide-body giants favored by European airlines headed to North American destinations. The strategic split in airplane size is the result of differences in fare-pricing software, reliance on hub airports, and passenger preferences in the two markets. Here’s why Europeans fly larger than Americans:
1. U.S. airlines manage fares more tightly. Revenue management software is widely used across the U.S. industry to oversee how many seats are sold at specific prices—a strategy that can maximize profitability when tweaked just so. Deploying sophisticated algorithms to determine pricing was a direct result of the industry’s deregulation in 1978—a process that occurred nearly 20 years earlier than in Europe, airline analyst Robert Mann notes. The software does best when managing an airplane without that many seats. “Too much capacity (larger gauge with more seats) puts those tools outside their sweet spot and unable to deliver improvements in unit revenue,” Mann wrote in an e-mail. “This is why half of U.S. domestic frequencies are on regional partners’ smaller jets.”
2. Hubs play a huge role in aircraft size. The legacy U.S. airlines all have multiple hubs to feed, whereas British Airways (IAG:LN) and Air France (AF:FP) each has essentially one. United (UAL), for example, flies to London Heathrow from six of its eight U.S. hubs, seeing those multiple frequencies as a competitive weapon to lure corporate travelers who fly to the U.K. British Airways, however, feeds nearly all its North American traffic through Heathrow, which it says makes larger airplanes more logical.
“The B757 allows us to serve certain cities that we may not be able to serve profitably with a larger aircraft—this fact makes the service possible in the first place,” US Airways (LCC) spokesman Todd Lehmacher says, citing the summer service to Shannon. That route was successful and will return in 2014. Delta (DAL) also has found niche uses in Europe for the 757, as has American with a daily flight from New York to Madrid. (The main downside is flying west in winter, when high winds can boost fuel burn and necessitate expensive diversions for refueling.)
4. Europeans pay for cabin comforts. The traditional European flag carriers have a relatively robust business for first and business-class seats, compared with their American counterparts. Lufthansa (LHA:GR) is the largest provider of premium-cabin seating across the Atlantic and needs at least 60 business-class seats on most of its flights to North America to meet demand, spokesman Nils Haupt says. So while United can make do with 16 business-class seats on a 757, Lufthansa will not (usually) struggle too mightily to sell the 98 biz-class seats in its massive 526-seat A380s—nor the eight in first class.
1. U.S. airlines manage fares more tightly. Revenue management software is widely used across the U.S. industry to oversee how many seats are sold at specific prices—a strategy that can maximize profitability when tweaked just so. Deploying sophisticated algorithms to determine pricing was a direct result of the industry’s deregulation in 1978—a process that occurred nearly 20 years earlier than in Europe, airline analyst Robert Mann notes. The software does best when managing an airplane without that many seats. “Too much capacity (larger gauge with more seats) puts those tools outside their sweet spot and unable to deliver improvements in unit revenue,” Mann wrote in an e-mail. “This is why half of U.S. domestic frequencies are on regional partners’ smaller jets.”
2. Hubs play a huge role in aircraft size. The legacy U.S. airlines all have multiple hubs to feed, whereas British Airways (IAG:LN) and Air France (AF:FP) each has essentially one. United (UAL), for example, flies to London Heathrow from six of its eight U.S. hubs, seeing those multiple frequencies as a competitive weapon to lure corporate travelers who fly to the U.K. British Airways, however, feeds nearly all its North American traffic through Heathrow, which it says makes larger airplanes more logical.
“The B757 allows us to serve certain cities that we may not be able to serve profitably with a larger aircraft—this fact makes the service possible in the first place,” US Airways (LCC) spokesman Todd Lehmacher says, citing the summer service to Shannon. That route was successful and will return in 2014. Delta (DAL) also has found niche uses in Europe for the 757, as has American with a daily flight from New York to Madrid. (The main downside is flying west in winter, when high winds can boost fuel burn and necessitate expensive diversions for refueling.)
4. Europeans pay for cabin comforts. The traditional European flag carriers have a relatively robust business for first and business-class seats, compared with their American counterparts. Lufthansa (LHA:GR) is the largest provider of premium-cabin seating across the Atlantic and needs at least 60 business-class seats on most of its flights to North America to meet demand, spokesman Nils Haupt says. So while United can make do with 16 business-class seats on a 757, Lufthansa will not (usually) struggle too mightily to sell the 98 biz-class seats in its massive 526-seat A380s—nor the eight in first class.
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