BrusselsAirlines - the TURBOPROPS will come!

[Flanker]

The problem with the ATR42 is that it burns only 15% less fuel while carrying 30% less pax compared to the ATR72.

To cities like BRS and NCL, the Q400 would have some excess capacity but there is a great thing about the Q400: if you slow down to the speed of the ATR72, it almost burns as much.
With the resulting Q400's low operating cost, you can stimulate lower yielding leisure demand to fill the back of the aircraft.

Simply put, where the ERJ's needed 40-45 pax to break-even on the flight, the Q400 only needs around 30-35. Any extra seats sold result in profit. That means that if they manage to sell the extra 35 seats at 50 euro a piece without cannibalizing higher yield ticket sales, they can make 1500EUR on a single flight.

This is also the reason why SN shouldn't put an A319/A320 on every major city link.
Sometimes, not always, it will be much easier to manage yields optimally with 2 Q400's than with 1 A319 flight because it's much easier to stimulate the lower yield portion of the cabin without affecting the higher yield cabin. In fact, you're more likely to stimulate the higher yield portion as well, by offering an additional frequency option.
Later on, if you manage to grow your higher yield to the point that both Q400 flights are almost full with premium traffic, you can decide to try to put a larger RJ on one or both of them, like Flybe has done witht the E195.

[airazurxtror]

A point of view which will sure look foolish to all of the technicians and financiers of this forum but is that of a passenger : the Q400 is ugly, perhaps the ugliest aircraft now operated. The ATR looks much more like a good aircraft.

[Zorba]

That might be your opinion, I'm sure lots of other passengers think the Q400 is as impressive as say an RJ or ATR

[Inquirer]

I have the feeling the Q400s are even too large for the thin routes which could be operated by tps.

I regularly use their Q400 flight to HAJ and can confirm the average load on that route seems to be around 35 pax or so, so at least there, the Q400 is indeed overkill and an ATR42 would do just fine.

The Q400 only needs around 30-35. Any extra seats sold result in profit. That means that if they manage to sell the extra 35 seats at 50 euro a piece without cannibalizing higher yield ticket sales, they can make 1500EUR on a single flight.

Yet the question is: CAN you sell the extra seats?
If you can't, you're basically just flying a too big plane and might as well downsize to smaller and likely cheaper stuff: not the ERJ which you compare to, but for instance an ATR42 like Air Key West suggested.

Also, have you noticed how you are basically promoting a volume based strategy here, which you have spent countless hours on bashing before, when it came to the upscaling from Avro to A319????

With 2 Q400's than with 1 A319 flight (...) it's much easier to stimulate the lower yield portion of the cabin without affecting the higher yield cabin. In fact, you're more likely to stimulate the higher yield portion as well, by offering an additional frequency option.

To stimulate higher yield on the route, the additional frequency needs to be sufficiently displaced from the existing ones, otherwise there's no benefit in having more options.
Splitting out the same capacity over more flights on smaller planes operating throughout the day, also means you'd actually be significantly cutting the offered capacity around the existing times.
If we assume those flights are timed to match customer's demand, that's not such a great idea IMHO, as also the lower yielding passengers have a clear preference for well timed flights and may start to look for less costly alternatives on competitors, even if it means connecting at their nearby hub even.

In short: I think it is just not such a good idea to use just 1 type of plane, regardless what type it is.
IMHO, peak hour flights need to be operated by bigger planes to match customers' demand, while additional frequencies should be operated on smaller planes during off peak hours. Only then can you combine the best of the 2: offer more frequencies AND still have sufficient capacity when demand is highest.

Later on, if you manage to grow your higher yield to the point that both Q400 flights are almost full with premium traffic, you can decide to try to put a larger RJ on one or both of them, like Flybe has done witht the E195.

And what's the E175 for at FlyBe? They offer as good as the same capacity as the Q400...

A point of view which will sure look foolish to all of the technicians and financiers of this forum but is that of a passenger : the Q400 is ugly, perhaps the ugliest aircraft now operated. The ATR looks much more like a good aircraft.

I agree!
Sadly, airlines don't select planes on looks: otherwise we'd all still be flying the 727 or Concorde, I am sure!
Just imagine that!

[Yuri166]

I think getting ATR in stead of Q400 is definately worth considering. Then you can have a mixed fleet of 42 and 72, and optimise your route demands. But to be honest, I think the profit of a smaller type like the 42 is outweighed by the cost operating of yet another type. And you are less flexible in swapping aircraft around if required. I also think that this study has allready been done by Brussels Airlines, and the choice has been made in favour of the Q. Depending on ticket prices of coarse, but a Q should break even around 30 to 35 pax. That offers a lot of flexibility and room to let routes grow.

I also think that we allready know which planes are going to be Brussels Airlines' owwn fleet... A simple 1+1=2 story. Flybe is getting rid of its Q400's in favour of the ERJ. They have allready shed some older machines. I think at the end of the two year lease, the G registration is simply painted over by an OO one. That will save at least an expensive paintjob.

[Flanker]

To stimulate higher yield on the route, the additional frequency needs to be sufficiently displaced from the existing ones, otherwise there's no benefit in having more options.

obviously

Also, have you noticed how you are basically promoting a volume based strategy here, which you have spent countless hours on bashing before, when it came to the upscaling from Avro to A319????

It depends.
BRS, NCL and other similar destinations used to be RJ85 routes that went ERJ.
You can call it a volume strategy indeed but then again we're speaking of destinations with no direct competition, where the yield structure would be very different from a BRU-FCO or BRU-MAD where the competition does not enable SN to optimise the yields. Moreover the difference between filling a Q400 and an A319 is quite a structural one.

In short: I think it is just not such a good idea to use just 1 type of plane, regardless what type it is.
IMHO, peak hour flights need to be operated by bigger planes to match customers' demand, while additional frequencies should be operated on smaller planes during off peak hours. Only then can you combine the best of the 2: offer more frequencies AND still have sufficient capacity when demand is highest.

Yuri has the right argument.
Operating a limited number of ATR42's, even within a mixed fleet of ATR42 and 72's is suboptimal.
The choice has been made and the reason for it is obvious: the Q400 offers a level of flexibility that the ATR's don't, in terms of flying longer regional routes.

And what's the E175 for at FlyBe? They offer as good as the same capacity as the Q400...

While the Q400's built Flybe, I think that the E175's will destroy it. I think that the E175's don't fit in Flybe's strategy and that it was an impulsive purchase in a bid to become a more premium airline.
I don't believe in the E175's business model at these high fuel prices.
The E195 could however be an interesting choice between the Q400 and the A320. But then again, that's if you're name is JetBlue or Lufthansa or even AZ. For SN it's too big.

The MRJ is the absolute CASM killer, with trip fuel comparable to the turboprops.
It wouldn't be a bad thing if SN actually manages to survive the next years with Q400 wet leases and go for the MRJ90's/100's. As European launch customer, they should be able to pull a good deal.

[Inquirer]

BRS, NCL and other similar destinations used to be RJ85 routes that went ERJ.

Yes, and when I used to fly to BRS a couple of years ago (our plant overthere is closed now), we were always max 30 on the flight too, so that shows what the natural demand on the route is, regardless the plane you deploy.

You can call it a volume strategy indeed but then again we're speaking of destinations with no direct competition, where the yield structure would be very different from a BRU-FCO or BRU-MAD where the competition does not enable SN to optimise the yields.

Rome and Madrid are popular tourist destinations which make it fairly easy to attract impulsive leisure passengers, provided the ticket price is set low enough: I doubt many people will impulsively book a trip to Bristol or Newcastle however; they surely aren't doing so to Hannover right now and that shouldn't be a surprise even. In fact, I doubt it was ever the aim?

Moreover the difference between filling a Q400 and an A319 is quite a structural one.

Going from an E145 to a Q400 is about 80% more capacity.
Going from an RJ100 to an A319 is about 35% more capacity.

the Q400 offers a level of flexibility that the ATR's don't, in terms of flying longer regional routes.

My personal take is that the Q400 is a typical compromise plane: there are more efficient turboprops of roughly the same size out there for the really short regional routes and there are more efficient jets of the same size out there for the longer regional routes too.
As such, it shouldn't be a surprise the 'all rounding' Q400 is somewhat caught between a rock and a hard place and thus never became a great success. It seems its high days are long past it too, as airlines try to use more suitable planes in an effort to cut excessive operating costs, meaning they are dumping the Q400 for planes more optimized for the missions they fly: seriously, does the Q400 still look as good compared to anything else but the ARJs? I seriously doubt it....

[Flanker]

Rome and Madrid are popular tourist destinations which make it fairly easy to attract impulsive leisure passengers, provided the ticket price is set low enough: I doubt many people will impulsively book a trip to Bristol or Newcastle however; they surely aren't doing so to Hannover right now and that shouldn't be a surprise even. In fact, I doubt it was ever the aim?

c

I think that the potential of BRS, NCL, BHX, LCY and such other routes are more about the pax originating there than pax originating around BRU. What I mean is that with that excess capacity, it's much easier to stimulate leisure pax who are looking to fly BRS-BRU-MAD or NCL-BRU-FCO, to fill the excess capacity.
Whether or not SN succeeds in that is another story.

Going from an E145 to a Q400 is about 80% more capacity.
Going from an RJ100 to an A319 is about 35% more capacity.

The jump from E145 to Q400 is a 56% jump in the current configurations.
SN was actually retiring RJ85's in favor of A319's, so there you have a 75% capacity increase.

But although spectacular in percentage terms, you have to look at the facts:
-Between the ERJ145 and the Q400 is a 30 pax gap, and there is no competition on the route.
-Between the RJ85 and the A319 there is a gap of 60 seats and there you have huge competition.

This means that the excess capacity will be much more manageable in the first comparison, because of the high amount of premium traffic linked to the lack of competition.
In the second example, your overall yields will be pulled down as you expose cheap fares to premium traffic, pulling all the yields down.
There is no better proof than to see what happened in 2011:
In 2011, Revenue growth was lower than capacity increase, proving that although the strategy looked like it worked at first, SN actually didn't take advantage of the traffic growth versus the very bad year 2010 to achieve better numbers because of this overoptimistic strategy.
It did work for a few months in the summer where leisure dominates but on average it pulled all the yields down because outside the summer, all the premium pax were able to book lower fares as SN went looking for leisure traffic to fill the back of the cabin.

[Inquirer]

I think that the potential of BRS, NCL, BHX, LCY and such other routes are more about the pax originating there than pax originating around BRU. What I mean is that with that excess capacity, it's much easier to stimulate leisure pax who are looking to fly BRS-BRU-MAD or NCL-BRU-FCO, to fill the excess capacity.

FWIW: BRS may be a tiny little airport, but it has huge Easyjet operations: you seriously think you can fight them with connecting flights through an airport as expensive as BRU?

-Between the ERJ145 and the Q400 is a 30 pax gap, and there is no competition on the route.

Didn't you just say the market was not BRU based, but for instance BRS based?
In that case, you have to check for competition overthere, and as I've just told you, there sure is!

-Between the RJ85 and the A319 there is a gap of 60 seats and there you have huge competition.

I don't know who made you believe that, but you seem to have a relatively poor understanding of the way they use(d) their fleet throughout their network: it is my observation the A319 took over flights which were operated by RJ100s before and those in turn are now operating the ex-RJ85 flights, which is nowhere near the capacity incease you seem to think happened.

Sorry, but there are too many holes in your reasoning, once again...

Back to topic now: IMHO, there's a ZERO chance of filling a significant number of the additional seats the Q400 offers over any smaller turboplane on the routes they are going to operate on and so a smaller turboprop would indeed be a good option, the question are:
Are there wetlease operators around who can offer this?
Where did the Sabena ATR's come from? Wasn't that some Dutch company?

[cnc]

one of the things to keep in mind is that africa pax are allowed to take a lot of bagage. if you add some extra leisure tourists to it with 20kg bags the ATR will likely not be able to take all deadload.

[Yuri166]

Where did the Sabena ATR's come from? Wasn't that some Dutch company?

The Sabena ATR's were supplied by Schreiner Airways. And both of them were complete heaps of sh*t. It was a intermediate solution for the Sabena demands. For the longer term in fact, Schreiner was looking at the Q400 allready back then.

All this ended off coarse with the collapse of Sabena. Allthough Schreiner was invited to participate in the birth of SN Brussels Airlines. But due to their own financial problems due to the A300 fiasco, they were not able to do so.

Whatever it may be, I hope that Brussels Airlines continues to use old Sabena registration series for its aircraft, as it does up till now, and that the Dashes will become OO-SD*, as the SAW Dashes were PH-SD*

[tolipanebas]

Have you noticed how you are basically promoting a volume based strategy here, which you have spent countless hours on bashing before?

OMG!
That just made my day!
Flip-flop Flanker is all for a volume stategy today!

I think it is just not such a good idea to use just 1 type of plane, regardless what type it is.
IMHO, peak hour flights need to be operated by bigger planes to match customers' demand, while additional frequencies should be operated on smaller planes during off peak hours. Only then can you combine the best of the 2: offer more frequencies AND still have sufficient capacity when demand is highest.

One size fits all mediumhaul fleets are dead upon arrival at network airlines, regardless the type of plane used for the simple reason you need to be able to vary capacity throughout the day; otherwise you either lose out on potential revenues, or fly around too many empty seats, but then that was said years ago already.

You seem to have a relatively poor understanding of the way they use(d) their fleet throughout their network: it is my observation the A319 took over flights which were operated by RJ100s before and those in turn are now operating the ex-RJ85 flights, which is nowhere near the capacity incease you seem to think happened

Indeed, but then Flanker has never let hard facts step in the way of a good story, you know?

Another example of this is he claims revenues rose less than capacity last year!
Hard facts from SN's annual report: last year's capacity rose by 10.0% from 11.599m ASK to 12.756m ASK, whereas revenues rose from €930m to €1036m, or an increase of more than 11%.
Facts and Flanker, they just don't match up.

[me109]

turboprops are necessary for Brussels airlines to reduce operating cost on the shorthaul services.
But on the other hand I should start also to introduce the embraer 170/175/195 or RJ 700/900/100 family instead of ordering more A319/320. I should even decrease the number of A319/320 in the fleet.
For B.A. these aircraft will match more on their needs and the operational cost is largely reduced compared with the A319/320.

[brusselsairlinesfan]

To me,the Q400 / A319/320 mix seems to be a good option for the european network...
Combined with the A330 on long haul of course (give them more btw!!!).

[Bel33]

In my point of view, the ideal fleet should be a mix of:
- 6 Q 400
- 6 Embraer 175
- 12 Embraer 190
- 12 A319
- 6 A320
- 2 A321 (Moscow, Tel-Aviv,...)
- 9 A333 in 2013 and 12 after 2014 (Africa, US (east and west), South America (Brasil of course) and Asia (China, Japan)

[Flybe]

I try to stay out of these Flanker vs Tolipanebas discussions, but a few small remarks:

One size fits all mediumhaul fleets are dead upon arrival at network airlines, regardless the type of plane used for the simple reason you need to be able to vary capacity throughout the day; otherwise you either lose out on potential revenues, or fly around too many empty seats

Let me be clear, I do not have experience in airline management, and there are absolutely many more knowledgeable persons than me on this, but... doesn't it all depend on your strategy? I wouldn't say no to having a fleet of small aircrafts (only 1 type) if this would mean that (a) they would always fly around at near 100% capacity & (b) yields are high because you don't need to get rid of too many seats.

Then I wouldn't mind living with the tought that there is a higher potential (on some routes), because I also don't have the risk of flying half empty on other routes.

Hard facts from SN's annual report: last year's capacity rose by 10.0% from 11.599m ASK to 12.756m ASK, whereas revenues rose from €930m to €1036m, or an increase of more than 11%.

Irrelevant of your discussion with Flanker, comparing capacity with revenue is not a very good comparison. Compare costs of revenue to revenue. Those encompass leasing costs, (extra?) operational staff costs, fuel costs, etc. If these rose more than revenue, then you have a problem. The same if with a capcity decrease your costs of revenue would drop less than your revenue.

Statistically seen, I don't think that there is a very high correlation between capacity and costs of revenue. Too many different factors influence your costs of revenue, mostly related of course to the type of aircraft you choose for your capacity increase or decrease.

Kind regards,
Pieter

Edit for a rather important spelling error I made (would instead of wouldn't)

[wernerrav4]

I see in a lot of answers that we want a mixed fleet. Now it is all Airbus and a few 737's and some Avro's who eventually will all leave the fleet; but if we should think about the Embraer family is the operational cost and maintenance cost lower than with only A320/319 fleet + some Q400?

[tolipanebas]

Hard facts from SN's annual report: last year's capacity rose by 10.0% from 11.599m ASK to 12.756m ASK, whereas revenues rose from €930m to €1036m, or an increase of more than 11%.

Irrelevant of your discussion with Flanker, comparing capacity with revenue is not a very good comparison.

Oh, that is fully correct; however please note that it is not MY comparison, but HIS.
Not only is he making factually incorrect statements as I have drawn attention to by quoting the real world figures, it is indeed also nonsensical as a reference base as you rightfully pointed out here, thank you!

Better compare costs of revenue to revenue.

Indeed, and that can be done quite easily: a back of the envelope excerise will paint a picture which perfectly matches what I have been saying all along and will clearly disproof Flanker's take on reality.
Have a look at the balance sheet of last year, together with me, will you?

On the pro side, last year's total revenues rose by 106M last year.

On the cons side, expenditure increases of 20M for labour costs and 60M for leasing, catering, traffic and landing rights as well as handling fees were booked for 2011.
Then there's fuel: last year saw a 10% capacity rise, due in part from using bigger Airbus planes with more seats, but also from flying 5,4% more. The RJ is using the same tripfuel as the A319 (incredible but true), so basically only the extra flying has brought along additional costs in this field. In 2010, SN spent 237M on fuel and parts, so a 5,4% increase would put 2011 expenditure for this at 250M, or an increase of 13M.

Adding those up gives a total extra expenditure of 93M vs. an additional revenue of 106M, thus leaving a nice margin, also called 'profit' if nothing unexpectedly happens.

This shows it is indeed a very good idea to swap to bigger planes with lower CASM (just as you can expect), especially as they clearly have had no problem filling the extra seats: despite the extra seats offered, their loadfactor rose and revenues generated clearly outdid the projectable cost to achieve those revenues.

Sadly, if you look at the real fuel cost over 2011, it is not around the 250M figure, it climbed to 320M, or 70M more, because as we have all experienced ourselves when we fueled up our car, the price of fuel has simply exploded.

So to conclude, its not the swap from RJs to A319s that caused any of last years loss, it's SN's inability to get a grip on their fuel costs, just as I have been saying all along. They have the right strategy alright, yet they are delivered too much to the volatility of the markets for as long as they do not participate in a well run fuel hedging program like for instance Lufthansa's forward looking incremental hedging strategy. It's very difficult to price a ticket correctly if you are not sure what price you will have to pay for the fuel needed to fly the passenger buying that ticket. LH's strategy actually allows you to know this all important cost failry accurately at the time of selling the ticket and thus price that ticket correctly, whereas SN's far more naive volume hedging policy simply doesn't, with the known consequences in case fuel prices evolve too dramatically over a relatively short period (i.e. the period between ticket purchase and the actual flight).

[Flybe]

Sir, I complement you on your analysis.

May I ask if you know why Brussels Airlines is able to participate in Lufthansa's hedging program?

Kind regards,
Pieter

[Flanker]

I don't find the analysis compelling because I know from a very very good source that the revenues increased less than capacity on the European sectors.

Tolipanebas gives you an analysis of all revenues combined and all traffic combined from the balance sheet, but didn't SN have extra capacity last year? An extra A330 was added and started flying in Q3 2010.
This added quite some revenue and also quite some capacity.
Maybe we're also forgetting to talk about the new Club Med revenue as well and the new destinations?

The following argument is absolutely absurd because it doesn't reflect the expenditure rise in this cost category.
There is still a 15% gap in fuel burn between an A319 and an RJ85.

Then there's fuel: last year saw a 10% capacity rise, due in part from using bigger Airbus planes with more seats, but also from flying 5,4% more. The RJ is using the same tripfuel as the A319 (incredible but true), so basically only the extra flying has brought along additional costs in this field. In 2010, SN spent 237M on fuel and parts, so a 5,4% increase would put 2011 expenditure for this at 250M, or an increase of 13M.

You need to look at each of the segments separately to see how revenue and costs moved and not analyse from such general things as a balance sheet. A balance sheet is used only to analyse the general health of a company and to mark very general trends.