Right, I’m gonna sound completely thick now, but can someone explain to me what all this means.

I know revenue is all the income that a company gets so I know that BA will get it from selling flights for example.

Is operating profit once all the deductions have been made e.g. wages, fuel bill etc?

Finally, what is an operating margin?

OK. Airline economics 101.

Revenue is indeed income, for airlines it comes in two varieties, direct and indirect. The former is what it gets from flying passengers and freight, the latter is what it gets from being an airline (eg, marketing incentives, grants, money made on aircraft/fuel/forex trading etc etc etc)

From profit, take your costs – firstly, taking off the marginal costs of putting passengers on the aircraft (so that is reservation system costs, pax handling etc etc), then direct costs (fuel, landing, parking, nav charges etc).

Operating profit is technically operating revenue minus operating costs, so should be direct revenue minus direct costs (so Willie’s remuneration shouldn’t figure in it, since he is an overhead), but the aircraft standing charges and corporate overheads can get in the mix. All depends on how the airline in question accounts (remember that to a certain degree, the airline decides on how it presents its numbers, so long as they are on a consistent assumption base year on year).

The margin is just an expression of operating profit as a percentage of operating revenue – eg, from BA’s 2006/07 results, revenue was £8,492m, operating profit £602m – a margin of 7.1%. (Note that BA use an overall figure for revenue, rather than the more precise direct revenue measure – this is not uncommon).

Hope this helps.

TA

I can’t help but wonder if this says more about fuel (and other) costs or the viability of this sector of the market

The two are inextricably linked. If the market won’t bear the costs of the operation, then either the enterprise will fail, or serious cost-cutting is called for.

Guilty as charged….:p

What about An-225 and Hughes Hercules wing structural weight?

The latter could barely pull its weight out of the water, and the former – with only one built – proves the point about lousy economics, perhaps?

The A380 is in the end of the useful region

I think that’s probably correct. We’ll need to see some fairly large advances in materials technology before we get much larger. Whilst it is technically possible to build much larger aircraft now, the economics will go to hell in a handcart.

Another thought on a much earlier post – the AN225 doesn’t have to worry about the “box” – since it doesn’t tend to park at passenger terminals. Cargo aprons are typically much larger, since there is a lack there of limiting factors – eg, airbridges.

Happy to stand corrected. I was at Airbus at the time, and saw a much simplified view of the thing…

Ryanair are changing their reservation system from Navitaire OpenSkies to Navitaire NewSkies. This is a move which is being forced upon them by Navitaire, who are removing support from the previous, HP3000 based version of the software.

The data migration and integrity checking will take a good few days, hence the closedown. NS will let them introduce dynamic packaging and a few other toys as well.

Hope it goes better for them than it has for other operators…. 😎