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Old 18th February 2019, 17:44   #1
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Default Do airlines make money by cancelling flights?

According to a media report, airlines make more money when they cancel flights. Here's how they do it.

Quote:
Indigo has announced 30 flight cancellations per day till the end of March. It cancelled 130 flights on Friday. Jet cancelled 15 flights a day in the first week of February.
Quote:
In case of flight cancellations, airlines are mandated to rebook passengers on other flights at no extra charge or refund full booking amount. But often they put you on long-haul flights at odd hours, which may force you to book a flight of your convenience for a higher price. Or you may end up paying double for a cheaper ticket.
Alternatively, airlines can book you on a cheaper flight.

Quote:
For example, you book a Jet Airways Delhi-Chandigarh flight at 9:20 am for Rs 2,800. The airline then cancels the flight and puts you on a 6:20 am flight that costs Rs 1,600. So you have paid Rs 1,200 extra for a cheaper ticket.
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The aviation regulator has said that it will monitor the number of cancellations.

Source: Times of India

Last edited by ChiragM : 18th February 2019 at 17:59.
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Old 18th February 2019, 19:00   #2
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Default re: Do airlines make money by cancelling flights?

Sounds unusual. Typical press article with little data and no answerability. Do permit me to disagree. It is like saying Maruti makes more money by cancelling car bookings than by actually producing and selling the car.

The airlines first responsibility is to refund the money to you without deductions. When a flight is cancelled the meter on all the fixed costs is still running - lease rentals, parking charges, crew salaries and so on. Every hour an aircraft is on the ground is a financial albatross around the neck of the shareholders. You simply want the bird up and flying. I say this with very direct experience from my own pocket.

In the example given of Rs 2800 and Rs 1600 it is assumed that all tickets on the replacement flight are being sold at Rs 1600 when in reality ticket prices change depending on how many days are left before the flight.

Flights were cancelled recently because one of the runways at Mumbai was out of commission due to repairs and in case of Jet Airways due to their own internal financial challenges. The shortage of pilots is real driven by growth and inadequate training facilities or programmes in the country in turn a limitation on the foresight of Ministry of Civil Aviation. The industry has been screaming hoarse on this for well over 15 years.

Making airlines pay a penalty to the customer for flight cancellation for reasons other than infrastructure or weather is not a bad idea.
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Old 18th February 2019, 19:01   #3
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Default re: Do airlines make money by cancelling flights?

1. For example, you book a Jet Airways Delhi-Chandigarh flight at 9:20 am for Rs 2,800. The airline then cancels the flight and puts you on a 6:20 am flight that costs Rs 1,600. So you have paid Rs 1,200 extra for a cheaper ticket.

How so? Typically airlines cancel flights quite near to the date and time of journey. At that moment the seat price is definitely not going to remain Rs 1,600 - more on the lines of Rs 5,000-10,000 at the very least. So airlines actually end up losing money


2. In case of flight cancellations, airlines are mandated to rebook passengers on other flights at no extra charge or refund full booking amount. But often they put you on long-haul flights at odd hours, which may force you to book a flight of your convenience for a higher price. Or you may end up paying double for a cheaper ticket.

Yes, I can agree with this part. They may be counting on the passengers to not accept the deal offered by the airline and opt for a higher priced version.
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Old 18th February 2019, 19:40   #4
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Default re: Do airlines make money by cancelling flights?

Let us understand what’s being said here in the example. A 9:20 AM Delhi-Chandigarh flight is canceled. Question is why has it been canceled? Let’s assume some evil algorithm being run by the airline said that operating the designated aircraft on another route would be more profitable. Now let’s remember we are talking about SCHEDULED airlines here. The key word is SCHEDULED - meaning flights and slots are pre-approved by DGCA, Airports and ATC. Is the reporter telling us that this route had no aircraft allocated to it and was waiting for the 9:20 AM flight to be cancelled?

What may have happened is the aircraft allocated to this so called profitable route got grounded due to some reason. The airline thought canceling the not so profitable 9:20 flight makes more sense and would have allocated the aircraft from the canceled flight to the more profitable route. For the airline the calculation is simple. Which cancellation costs them the most money in terms of refunds is to be avoided. This is nothing unique to India or Indigo or Jet. Of course, there are other limiting factors like onward flights (the route on which the aircraft will operate next when it reaches its destination). It’s all very complex and cannot be done as a matter of routine the way the writer is suggesting. Airlines want to avoid cancellations as much as passengers do as it plays havoc with the entire schedule of the day.

I am not suggesting that airlines are saints but often accommodating close to 180 passengers on an equally convenient flight is impossible, especially on infrequent routes. Some are bound to get lemons as options. Unfortunate but happens. We rarely show gratitude in press when we miss our flight and the airline accommodates us on the next available flight at no extra cost, even if it had more expensive tickets.

Last edited by Malyaj : 18th February 2019 at 19:50. Reason: Corrected typos
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Old 18th February 2019, 20:13   #5
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Default re: Do airlines make money by cancelling flights?

On the contrary, airlines would lose money on a cancelled flight since the fixed costs, as V.Narayan pointed out, pile up but there's no operational revenue from that flight. Add to that, the man hours spent in re-booking, luggage handling and so on.

Airlines and aircrew want to have the aircraft wheels-up as much as possible because that's what gets in revenue.

We don't in India but in most western countries, you get a sizeable compensation for a cancelled flight: 5-star accommodation until the flight you get re-booked on, meals and an airline voucher for anything between $100 - $300.

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Originally Posted by V.Narayan View Post
Sounds unusual. Typical press article with little data and no answerability.
Some smart people might be at chai discussing jugaad and probably thought of this.
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Old 18th February 2019, 20:21   #6
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Default re: Do airlines make money by cancelling flights?

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Originally Posted by libranof1987 View Post
On the contrary, airlines would lose money on a cancelled flight since the fixed costs, as V.Narayan pointed out, pile up but there's no operational revenue from that flight. Add to that, the man hours spent in re-booking, luggage handling and so on.

Airlines and aircrew want to have the aircraft wheels-up as much as possible because that's what gets in revenue.

We don't in India but in most western countries, you get a sizeable compensation for a cancelled flight: 5-star accommodation until the flight you get re-booked on, meals and an airline voucher for anything between $100 - $300.



Some smart people might be at chai discussing jugaad and probably thought of this.
The headline of the article is horribly misleading. At best it is lack of understanding and common sense on part of the writer and at worst it is deliberate. No business can "make money" by cancellations. In this specific case all you can do is cut your losses by assigning aircraft to more profitable routes and cancelling less profitable flights. Like unsold room nights for a hotel, cancelled flight means that revenue is gone forever.

Let's say a flight is so grossly underbooked that it makes more sense to cancel and bear the cost than operate and burn even more money. But this is not a situation the airline wants to be in, let alone practice this model with relish. In most cases they will still operate the flight because the aircraft needs to be at the destination to carry on with its schedule instead of snowballing into more cancellations. Nothing in the article makes any sense at all.

Last edited by Malyaj : 18th February 2019 at 20:39.
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Old 19th February 2019, 02:41   #7
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They have made it sound like these are not airlines but some private bus operator operating adjacent to Kashmiri Gate who will keep waiting for the bus to get full or otherwise refund the money. However, it has been seen that Spice Jet have, in the past, offered deals on flights booked 6-8 months in advance and then cancelled the flight at the last moment. Has happened to a few friends of mine.
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Old 19th February 2019, 07:16   #8
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Default re: Do airlines make money by cancelling flights?

Flight Cancellations are technically referred to as IROPS in aviation terminology which is short for Irregular Operations. IROPS is one of the areas we work on so if anyone tells you that airlines make money out of IROPS he is HUGELY misinformed. IROPS bring to the fore a lot of other issues such as:

1. Passenger Management & Costs - Social media management - ensuring that there is adequate support through requests for alternative flights, complaints floating in the media, preferential treatment to business class passengers in terms of flight allotment, protecting brand equity (if an airline was notorious for cancelling flights you wouldn't chose it or would do so as the last option), Re-assigning passengers to other flights, putting them up in hotels, arranging other / own aircraft etc

2. Crew Re-Rostering - the crew that have been assigned to the aircraft will have to be managed and reassigned to other aircraft or put up in hotels.

2. Aircraft Rescheduling - Flight Ops are planned well in advance and the flight plans submitted to the DGCA, Airport, ATC etc. So the aircraft that is cancelled will have to be reassigned another flight which isn't exactly easy.

4. Roll on effect - A cancelled flight would lead to other cancellations / loss of revenue as there would be other passengers waiting to be picked up at the destination.

5. Aircraft Utilisation Levels - Aircraft do not make money sitting on the ground. So if there is more money to be made through cancellations who would run an airline?

6. Apron charges : Aircraft have to pay for the space they utilise at the airport while sitting idle. These "parking charges" are not exactly the same as the amount charged by Phoenix Mall while parking your car.

And more.

The OP is actually saying that an airline makes money by not running that airline. If that were true all airlines would just cancel their flights and sit around and make money.
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Old 19th February 2019, 15:54   #9
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Default Re: Do airlines make money by cancelling flights?

Quote:
Originally Posted by V.Narayan View Post
.

Making airlines pay a penalty to the customer for flight cancellation for reasons other than infrastructure or weather is not a bad idea.
India does have fairly good passenger protection laws. It is another matter that many of us are not aware of it. How many of us bother to read the small print in the airline websites?.

This is the relevant link in the DGCA website which gives the details.

http://www.dgca.nic.in/rules/car-ind.htm

Since this leads to the main Civil Aviation Requirements (CAR) page , to
make it easier , I have uploaded the relevant document/


https://www.team-bhp.com/forum/attac...1&d=1550571126
Attached Files
File Type: pdf DGCA Passenger Rights.pdf (141.0 KB, 99 views)
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