
Give them an inch and they take $773 million - endtwist
http://notes.unwieldy.net/post/50478689215/give-them-an-inch-and-they-take-773-074-040
======
chaz
In 2006, JetBlue removed an entire row of seats:

    
    
      JetBlue estimates a net savings of $30 million over five years by removing
      six seats from the A320 fleet, as a result of reducing the inflight crewmember
      team to three, and by reducing the weight of the aircraft by approximately 904
      pounds, which will lower the fuel burn. That figure includes lost revenue
      opportunities as a result of selling six fewer seats per A320 flight. The figure
      does not include any revenue improvement that may result from the enhanced
      JetBlue Experience.
    

[http://investor.jetblue.com/phoenix.zhtml?c=131045&p=iro...](http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-
newsArticle&ID=942110&highlight=)

~~~
shabble
coming next, Responsive Seating!

per-flight configurable seat modules, for exactly the number of people on
board, and can be quickly loaded/unloaded to minimise excess weight. Installed
seats adjust their clearance automatically based on available space and user's
ticket price/options.

~~~
yardie
I can already see the logistics and engineering nightmare of a flight devoid
of seats having to bump an entire group of passengers because the next leg
doesn't have enough inventory.

Seats are fixed because bolts are easy. Once you get into the whole latches
and levers business you compound your points of failure. Ever look under the
last row of foldable seats in an SUV? A lot of engineering goes into securing
100kg bags of meat to an object hurtling along the ground at 80km/h. Now
imagine having to do the same for a plane traveling 2-3x that.

~~~
freehunter
Does speed really matter, though? I mean, the issue with cars is that they
sometimes come to a very sudden stop, and in those situations the passengers
need to be bolted to the ground. Planes don't often come to very sudden stops
and when they do, bolts don't matter much.

The seats need to be secured, yes, but not in nearly the same fashion.

~~~
yardie
Yes. I would say even more so than cars. Even at its slowest a plane is
traveling at 3x the speed of a car or 9x the kinetic energy. Then you have the
problem of a compounding failure. If even one passenger gets lose the seat in
front has to do 2x the work. A plane with 30-70 rows can have a domino effect
if the bolts don't hold.

Also cars don't instantly stop. Most of the energy is dissipated by shedding
the engine under the body and crumple zones. They have a dramatically shorter
runway than planes.

------
Construct
Not quite. The extra seats only provide additional revenue when the flights
would have otherwise been full. From the article, the average flight is only
80% full, which means those six extra seats aren't providing any additional
revenue.

To determine the actual revenue increase from those six extra seats, we would
have to know how frequently flights have less than 6 empty seats.

~~~
endtwist
While these numbers will never be perfect, per se, RITA[1] shows that in 2011,
Southwest's loadfactor was 80.8% while in 2012, loadfactor was 80.4%. So, the
flights remained around 80% full on average.

I took this into account in my calculation and assumed roughly 4.8 more seats
were filled on average per flight, not a full 6.

[1] <http://www.transtats.bts.gov/carriers.asp?pn=1>

~~~
jdoliner
I think the key question then is why it was that 4.8 more seats were filled on
average per flight. If we had data the showed that the distribution of plane
occupancy were the same year over year save for a few occasions where last
year the plane had been at capacity but this year those extra 6 seats had been
put to use then the conclusion could be valid. However with the data I've seen
so far it seems spurious to conclude that the extra 4.8 filled seats were
caused by the extra 6 physical seats.

~~~
jcampbell1
Assume the pricing for seats is as follows:

$100 for first 50% of capacity

$120 for next 20%

$170 for next 20%

$300 for next 5%

$600 for final 5%

What is the revenue impact of expanding capacity? The solution is not obvious,
but the author's approximation is more accuare than you suggest. You obviously
can't solve this without a stochastic ticket demand model, but 4.8 is much
closer to the right answer than 0.

~~~
josefresco
Also if the airline wants to maintain an 80% capacity, having an extra x% of
seats means they add to revenue if they can maintain that occupancy
percentage. In this case we don't even need to factor in 100% occupancy, which
if anything would help the numbers as I'm sure last seats on a fully booked
flight aren't cheap.

~~~
wtvanhest
They target around 100% full. That being said, having more seats allows them
to adjust their pricing model so that they have more seats to attempt to
maximize revenue.

Depending on the demand structure of routes, those 6 seats may have wildly
different values and could potentially be worth more than the average ticket
price, on average for the airline.

Since this is counter-intuitive, I'll explain why briefly:

Airlines attempt to price discriminate by selling low priced tickets to
leisure travelers and high priced tickets to business customers.

The problem airlines face is that business travelers book at the last minute.

Since business travelers book at the last minute, they need to estimate the
number of business travelers who will be flying.

If the average leisure passenger ticket sells for $100, and the average
business ticket sells for $500, just having 1 extra seat can add 5 leisure
tickets worth of revenue assuming they sell the same number of leisure
tickets.

Realistically, their model will readjust the optimal pricing changes overtime
to capture the most value. Because the additional seats give the model more
flexibility, I would not be surprised if the additional seats added more than
an average of 80% of 6 seats multiplied by the average ticket price.

------
mrshoe
In addition to the sketchy mathematical foundation, there's another reason to
not draw too many conclusions from this observation: your company, product,
and customers are probably quite unlike Southwest Airlines. For starters,
airline customers care almost exclusively about price.

Joel Spolsky was wise to warn _against_ doing what this article suggests
(<http://www.joelonsoftware.com/items/2007/09/11.html>):

    
    
        In one of Gerald Weinberg's books, probably The Secrets of Consulting, 
        there's the apocryphal story of the giant multinational hamburger chain
        where some bright MBA figured out that eliminating just three sesame
        seeds from a sesame-seed bun would be completely unnoticeable by anyone
        yet would save the company $126,000 per year. So they do it, and time
        passes, and another bushy-tailed MBA comes along, and does another study,
        and concludes that removing another five sesame seeds wouldn't hurt
        either, and would save even more money, and so on and so forth, every
        year or two, the new management trainee looking for ways to save money
        proposes removing a sesame seed or two, until eventually, they're
        shipping hamburger buns with exactly three sesame seeds artfully arranged
        in a triangle, and nobody buys their hamburgers any more.

~~~
Nursie
>> For starters, airline customers care almost exclusively about price.

I wish that wasn't the case. I'd gladly pay an extra £20 on an international
flight for decent food, and I regularly do pay an extra £50 or so for more
room or an exit row seat. I know there's a market of people like me, for whom
business class is way to expensive just to make a few hours a bit more
pleasant, but who aren't just counting every penny. The airlines seem to have
started to cater for us with things like Delta's "Comfort Economy", but it
needs to go further.

~~~
edent
The trick for decent food on airlines is to specify a meal preference. I'm
usually say I'm "Asian Vegetarian". On most flights I get a reasonable curry,
or something a bit more interesting than the usual slop they hand out.

As a bonus, special meals are usually served first and in some cases are
specially prepared.

As it happens, I am a vegetarian, so I don't "miss" the meat - YMMV.

~~~
Nursie
I'm not going to miss airline meat, certainly!

Vege option may well be a good thing, will try that one in future.

------
verroq
>implying the flights stayed 80% full after new seats were added

>implying decreased customer satisfaction didn't hurt their revenue

>implying their systems didn't need to scale because of increased customers

>implying their R&D on smaller legroom didn't cost anything

>implying upgrading planes didn't cost anything

>implying more customers on planes didn't have an impact on maintenance costs

>implying revenue means anything when you don't know the profit margins

~~~
patio11
The prevailing theory among air carriers is that demand for flights is totally
exogenous to the industry and allocation of flights between carriers in the
industry is, for most customers (e.g. not frequent business travelers, who are
price insensitive and care about mileage), dependent pretty much solely on
price. Accordingly, minor decreases in comfort which add capacity are pretty
much an auto-win.

Many people dislike this conclusion and dispute it's factual accuracy because
they don't want to believe that they'll predictably increase their own agony
to shave $5 off a ticket. But, well, non-experts opinion of their own behavior
often does not have 1 to 1 correspondence with reality which is tractable to
measurement with numbers.

~~~
tiredofcareer
For most customers, maybe, but I suspect there's a pretty sizable portion of
the population (myself included) that will happily pay more for an airline
that treats me extraordinarily well, considers my comfort while on board, and
gives me reasons to shout their name down the street. For example, Virgin
America is one of those airlines for me, and I will happily pay a premium to
fly one of their tragically few routes (they're one of the few airlines I fly
first on, as well). I blacklist Southwest entirely because of the complete
disregard for my experience shown on the three miserable flights I've had with
them. I don't think I fit in your business bucket, but that's a data point, at
least.

In another industry where profit is the focus, domain registration, I'm
absolutely _dying_ for a $100-$200/year registrar that knows what they're
doing and isn't awful to deal with. I will happily pay that premium since my
hosting bill far outweighs my domain registration, and handling support
tickets expediently and providing features I want are far more important than
the bottom line to me. If an extra $10/year from all customers means I get
IPv6 glue or a ticket answered inside of 72 hours, _please_ , do it! (This is
less relevant now, but was a concern for me in the past.) I'm willing to part
cash to be treated better in almost all cases.

~~~
mehwoot
_For most customers, maybe, but I suspect there's a pretty sizable portion of
the population_

Yup, and for those two things you mention that you are willing to pay more
for, there are probably 98 other things you aren't. Each person will have the
things they are willing to pay more for, and most will be different, so for
most services, 98% of people are going to choose the cheaper option.

Hence most companies won't give a shit, and almost everyone has moments where
they wonder why there isn't an option to pay more for higher quality of X
product.

~~~
tiredofcareer
I wouldn't be so sure. I pay a rent premium for a view.

~~~
URSpider94
Yes, but presumably you looked at the apartment first.

Unless airline search sites start listing seat pitch, amenities, seat recline,
in-flight entertainment quality, etc. next to the ticket price when selecting
a fare, it's hard to see how these factors would play into a purchase
decision.

Even if the data were there, I'm wagering that the lions share of customers
would keep $20 in their pocket at the cost of some minor discomfort.

~~~
mseebach
> Even if the data were there

Oh, but the data is there.

<http://www.bbc.co.uk/news/business-21227287>

------
DrStalker
If flights are at 80% capacity adding 6 extra seats just means an extra 6
empty seats on every flight. The $733 million number is meaningless - what is
actually needed is to know how many post-reconfiguration flights had 5 or
fewer free seats, since that is the only situation in which the extra capacity
is being used.

~~~
josefresco
Not if they maintained the same occupancy rates but with a higher total
capacity.

80% of 100 is 80 80% of 106 is 84ish

~~~
StavrosK
Why would the average number of passengers suddenly change just because they
installed six more free seats?

~~~
Dylan16807
Look at the post right next to the one you're replying to. More seats makes it
easier to get more people on board without risking filling up.

~~~
StavrosK
But if they _could_ get more people on board, they wouldn't be 80% full. Or
are you referring to the times they're completely full, which would go up by 6
seats? Then 6 doesn't get added to the entire average.

~~~
Dylan16807
It's probabilistic. You can't just sell 100% of tickets ahead of time and be
done. Some people don't show up. Some people buy tickets at the last second.
The more tickets you sell the more you risk running out of space and having
angry customers that need to be compensated. Even if you assume every flight
has the same demand, having more seats lets you sell more tickets which lets
you get more people on board, without needing flights to be full.

On top of that, you have uneven demand causing completely full flights, and
while it doesn't add 6 to the entire average it adds a notable fraction of 6.
Note that nobody actually claimed they added a full 6 more passengers.

~~~
StavrosK
Josefresco above claimed that the 80% rate could be 80% of the new seating
arrangement, which just adds +6 across the board. That's what I "took issue"
with.

~~~
Dylan16807
What? It adds +4.8 which seems to match what actually happened.

<https://news.ycombinator.com/item?id=5710359>

------
mistercow
I feel like saying "a single inch" like it's a pittance when we're talking
about airplane legroom is a bit silly. Sure, it seems small compared to the
other 31 inches, but that's not a fair comparison, because most of those 31
inches are non negotiable.

Realistically, we're talking about at least a 5% reduction in leg room, and
that's nothing to sneeze at.

~~~
zackzackzack
You obviously are not above average in terms of height. I'm 6'5" and planes
are a nightmare of cramps and bruised knees. A single inch can mean the
difference between being able to sleep comfortably on a long flight and
staying awake while stiffening up for eight hours.

~~~
lostlogin
Ditto. I tried the near OD strategy for an Auckland-Rome series of flights. It
turns out that you reach the point where they dont work anymore - at least not
easily. At 4x the recommended dose I couldn't sleep that last 6 hours. I seem
to max out at about 20ish hours of sleep. I almost got a DVT - swollen leg and
very painful. I just avoid flights now.

Edit: premature post.

------
mbesto
> _That means, every year that single inch earns them $773,074,040 of
> additional revenue. I guess every little bit really does count._

This does not. There are so many intangibles here, that the conclusion drawn
is very ill-conceived. Here's a list of things that can affect this number:

1\. The amount of customers lost due to restrictive seats

2\. The negative PR which will result from the change

3\. The impact on flight price that the company may change after said PR

4\. Is the data from all of those references accurate?

The list goes on and on...

It's a nice thought, but there's much smarter people with access to more
precise information that draw these conclusions _within_ the company.
Enterprise businesses aren't as dumb as we all may think they are.

------
dangrossman
I've been underestimating the size of the airline industry. I have a hard time
reconciling the fact that the airlines always seem to be on the verge of
bankruptcy with numbers this big -- $90+ billion a year in just passenger
revenue.

~~~
kevingadd
The issue here is probably their margins, not their volume, though? It doesn't
matter how much passenger revenue they bring in if the expenses (safety,
security, regulation conformance, equipment maintenance, fuel, staff pay...)
outweigh it.

~~~
kamkazemoose
It reminds me of the old quip "We lose money on every sale, but we make up for
it in volume."

------
film42
My girlfriends father is a pilot for southwest. For my birthday we flew home
with my pregnant sister, we of course flew standby. On the way back, my sister
and I were separated in Phoenix, where she ended up getting stuck for the
night because every flight after 11am was booked. What I'm saying is that
although they were able to add more seats, they still can't give everyone a
seat, and to southwest that's money lost, and to me, that's one frightened
sister.

Although I enjoy my legroom, it was hell trying to get my sister home.

~~~
ricardobeat
I love dark chocolate.

------
poink
Being 6'5, my knees hate these numbers.

~~~
sharkweek
at 6'4" I'm sort of _just_ below that range of "get this man an exit row,
stat!"

my buddy who is 6'8" has it given to him virtually every flight

~~~
lostlogin
I'm a bit under 6'5" and bit over 6'4". I know this situation well and have
only rarely managed to get an exit seat, and yet have often seem people who
are almost half my height in them. The only time we managed to get an exit
seat was when my pregnant wife was literally crying from her legs being so
sore that they gave them to us.

------
xefer
I don't know the economics of airlines, nor travel that much, but I can't
believe there isn't a niche for an airline that features a reasonable amount
of legroom at a reasonably higher cost. Something above the "cattle pen with
wings" that people seem to have to put up with.

------
kayoone
UKs Ryan Air was even proposing ideas of having people stand during flights
(yep, its really that ridicolous) and letting people pay to use the
lavatories...

Not that they would get through with that but still, they are searching for
every inch to make more money.

~~~
switch007
Those crackpot schemes are just designed to get their brand in the Daily Mail
and in turn, for people to talk about Ryanair. (their headquarters are in
Ireland, not the UK)

~~~
lostlogin
Is it Ryan air that gets all its air hostesses to paint their faces with
orangeish makeup? I have a recollection of a collection of air hostesses in
skin-colour-inappropriate makeup from a trip a few years back.

~~~
philk10
If it's orange then it's likely to be EasyJet as everything they do is that
colour

------
petercooper
If they came up with a way to run at 90% capacity instead of 80%, I wonder how
many seats they could remove and how many inches of leg room could be gained.

------
quackerhacker
Nice! When you account simple changes like this, it's amazing just due to the
massive improvement. I could just imagine the saving for Walmart if they
followed Ikea's model with doing away with plastic bags.

~~~
johnpowell
The Wal*Mart here doesn't have plastic bags but that is due to a city
ordinance in Eugene. They charge five cents per paper bag but most people just
bring in their own bags.

------
wangthony
not all Southwest airplanes are 737's

~~~
tptacek
Southwest is famous for maintaining an all-737 fleet (I don't know what
they're doing with Airtran's 717 fleet, but Airtran hasn't been integrated
with SWA yet.)

