Lines between countries of different wages

[chornedsnorkack]

Who sell most tickets to lines between countries of different wage levels?

The lines would be under some sort of bilateral agreement.

For example, between USA and UK, Bermuda II says only 2 airlines of each country can fly to Heathrow. Also only to a limited number of deliberately inconvenient US airports... Subject to availability of slots - and BA holds the best ones in Heathrow. Also Bermuda II refers to IATA for prices, right?

The capacity is not directly controlled - so most seats are sold by Britons, as they fly 747-s to Heathrow, while the Americans fly 767-s.

Well, US and UK have roughly similar wage levels. But what about lines to countries with lower wages?

While much of the cost of flying comes from the fuel - and the price of fuel is relatively uniform around the world, since the fuel is cheap to transport on ground - it is said that labour costs are still the biggest cost item of airlines.

It would follow that the most competitive airline on any line is whoever can keep the labour force with lowest wages. And obviously, on a line between countries of different wage levels, the airline of the richer country cannot hope to match the labour costs of the competitor!

So... if the slots are divided equally between competitors, the airline of the poorer country would have fabulous prices and high load, while the competitor would be plagued with losses whether they sell tickets at below cost or make the tickets more expensive and lose loads.

If the prices are controlled so cheap tickets are forbidden, the airline of poorer country could afford to offer superior service at equal price.

For example, Emirates are getting loads of Airbus 380-800s in April 2007!

And they have their proposals. Which include an Airbus 380-800 fitted with all-economy 780 seats. With food paid from self-service counters and charging for optional IFE.

They declare they can make profits with Heathrow-Dubai-Sydney 400 € return tickets. To Sydney for €200 - or to Dubai, or somewhere else, like India, for less than that... imagine...

Why do the airlines of the richer countries bother to fly around the world?

[Advisor]

Why do the airlines of the richer countries bother to fly around the world?

To make more money i guess

[chornedsnorkack]

Why do the airlines of the richer countries bother to fly around the world?

To make more money i guess

But how can they?

They can make money flying inside their own borders, because no one else can fly there - it is cabotage, so people can pay the domestic fares or stay on ground.

They can make money flying to other rich countries, because the bilateral agreements would allow only the airlines of the origin and destination country to fly there, and therefore the airlines of both countries have equal costs and make equal sums of money.

But how can they make money flying to poor countries? If they are to be allowed to fly there then the airlines of the poor countries must also be allowed to fly back, and they can offer much better prices...

[earthman]

Would you rather fly Biman or KLM?

[chornedsnorkack]

From reviews, Biman does appear to give poor service - but why?

[Vinnie-Winnie]

From reviews, Biman does appear to give poor service - but why?

Ever thought about bad management? Or just not being able to get any financing because of unstability in the country of origin? What about loyalty whether coming from a loyalty cards or just the Brand?


Why do you buy kelloggs Cornflakes instead of your local supermarket own brand, which is probably produced on the same assembly line as your Kelloggs Cornflakes?

Taste?

To be continued....

[earthman]

From reviews, Biman does appear to give poor service - but why?

Ever thought about bad management? Or just not being able to get any financing because of unstability in the country of origin? What about loyalty whether coming from a loyalty cards or just the Brand?


Why do you buy kelloggs Cornflakes instead of your local supermarket own brand, which is probably produced on the same assembly line as your Kelloggs Cornflakes?

Taste?

To be continued....

I actually buy my local supermarket brand instead of Kellogg's. They taste the same, they are cheaper, but the most important aspect is actually that the 500g box of Kellogg's doesn't fit into my cupboard, while the local supermarket brand 500g box does fit in there.

[chornedsnorkack]

From reviews, Biman does appear to give poor service - but why?

Why do you buy kelloggs Cornflakes instead of your local supermarket own brand, which is probably produced on the same assembly line as your Kelloggs Cornflakes?

Same assembly line would mean the same cost structure?

[earthman]

From reviews, Biman does appear to give poor service - but why?

Why do you buy kelloggs Cornflakes instead of your local supermarket own brand, which is probably produced on the same assembly line as your Kelloggs Cornflakes?

Same assembly line would mean the same cost structure?

Not really, Kellogg's packaging is more expensive, and they spend more on marketing. Supermarkets make more profit selling their own cheaper brand, than selling premium products.

[Bowlie]

Also Bermuda II refers to IATA for prices, right?

Bermuda I did (and it was that agreement that created the IATA traffic conferences) but that was the only agreement the US ever signed that mentioned IATA. Bermuda II is not liberal in respect of pricing, and is a single disapproval (i.e. if either government disapproved a tariff it doesn't come into effect) but government intervention by either the US or the UK has been minimal over the last 20 years or so (mostly related to pricing to points beyond the gateways)

[5Y-KQV]

I don't know if this would make any sense. If it doesn't I stand to be corrected.

With respect to countries with substantially different wage structures, Airlines from richer countries generally have larger fleets than airlines from the poorer countries. Since maintenance forms also a substantial cost to airlines, i think the richer airlines can benefit from economies of scale in the mx operations. This may possibly extend to obtaining fuel at a slightly lower unit cost than the poorer airline based on overall volumes purchased over a longer period.

Richer airliners generally also have more modern fleets than the poorer countries. Since the fares are not radically different, the richer airlines generally have lower costs on the same routes based on fuel and mx efficiencies offered by the modern fleet in comparison to the airliners operated by the poorer airlines e.g. the richer airline operating a 744/A330/A340/777 to say a 742/DC-10/L1011 operated by pooer airline. Maybe this type of lower costs may also apply to insurance costs.

Cheers,

Walter.