Empty leg economics

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dgnyc

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dgnycny
Hello and a question for charter operators.

I came across an empty leg between TEB and Boca going for an estimated $17,000 in a G-450.

What is the rationale behind charging more than the marginal cost of food and fuel for an empty leg flight?

Let’s assume that $17K is the all-in cost of ferrying the plane back to TEB. Since that’s the baseline cost whether the plane is empty or carrying a few people, why wouldn’t the charter operator price it at say, $5,000 instead of $17,000?

17K-5K+2K (2K est. food and gas for 5 people) = $14K cost and +$3,000 to the bottom line.

Is the likelihood of getting a customer not dependent on the price?

What am I missing here?
 
dgnyc said:
Hello and a question for charter operators.

I came across an empty leg between TEB and Boca going for an estimated $17,000 in a G-450.

What is the rationale behind charging more than the marginal cost of food and fuel for an empty leg flight?

Let’s assume that $17K is the all-in cost of ferrying the plane back to TEB. Since that’s the baseline cost whether the plane is empty or carrying a few people, why wouldn’t the charter operator price it at say, $5,000 instead of $17,000?

17K-5K+2K (2K est. food and gas for 5 people) = $14K cost and +$3,000 to the bottom line.

Is the likelihood of getting a customer not dependent on the price?

What am I missing here?
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Businesses aren't in business to lose money.
 
MauleSkinner said:
Businesses aren't in business to lose money.
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You're missing his question entirely. It's an empty leg. Sunk cost. It's going. Operator is trying to get some $$$ for it. It's going from point a to point b no negotiation. It seems that the odds of filling it full price are remote. Isn't it better to fill it at a lower price if possible than let it stay empty?


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dgnyc said:
why wouldn’t the charter operator price it at say, $5,000 instead of $17,000?
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Supply and demand. If they can get $17,000 for the leg, than why would they price it for $5,000?

Makes sense to me anyway.
 
Ryanb said:
Supply and demand. If they can get $17,000 for the leg, than why would they price it for $5,000?

Makes sense to me anyway.
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That's the question. Usually empty legs are deeply discounted.


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gsengle said:
Um, GA covers business aviation, charters, etc.

https://en.m.wikipedia.org/wiki/General_aviation


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OK Mr. Literal...you are correct...but my point being that pilots are most likely not gonna be the ones setting pricing polices for charter operations to answer the new OP's question beyond speculation.

Unless speculation is all he is looking for...then we have plenty of speculation experts here.
 
Shawn said:
OK Mr. Literal...you are correct...but my point being that pilots are most likely not gonna be the ones setting pricing polices for charter operations to answer the new OP's question beyond speculation.
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I'm not being literal I'm just being correct.

Lots of 135 pilots on here, that's how.

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OverTQ said:
That's the answer.
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That's not the answer. That sounds like full price. The question is do they really think they can get full price, especially since discounted empty legs are actually normal. Then again maybe the full price is higher. Want more than a glib they know what they are doing answer...


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MauleSkinner said:
Apparently this operator doesn't use that business model.
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That's the question. No one has answered the original question. Why do you think not?


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gsengle said:
That's the question. No one has answered the original question. Why do you think not?


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Because the business owner/management has decided not to discount empty legs.
 
Thanks captain obvious :)


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In a charter operation, the client pays for the empty leg, or the price is effectively doubled for the one way. This is part of the price of doing business.

Tim
 
tspear said:
In a charter operation, the client pays for the empty leg, or the price is effectively doubled for the one way. This is part of the price of doing business.

Tim
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Yep also true. And yet many operators advertise empty legs at a discount to get some addl revenue. Some here were unaware. So the question becomes why...


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gsengle said:
That's the question. No one has answered the original question. Why do you think not?


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How do we know know that $17,000 isn't a discounted price to begin with? The OP didn't provide the analytics for the originating flight, so we don't have that information.

Seems to have created quite a perplexing question. :rolleyes:
 
tspear said:
In a charter operation, the client pays for the empty leg, or the price is effectively doubled for the one way. This is part of the price of doing business.
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This. Here is the charter price of a G450 based in Boca Raton.

Screen Shot 2017-06-13 at 16.35.23.png
 
Another consideration is eroding their existing business by undercutting their primary business. I'm sure that's a popular route so selling a $5,000 leg might result in loosing business for a $20,000 retail priced flight. Maybe an empty leg to Altoona or Greensboro would go for less.
 
Maybe the operator doesn't want the kind of people who would only pay $5000 for a $20,000 trip on his airplane.
 
Brad Z said:
Another consideration is eroding their existing business by undercutting their primary business. I'm sure that's a popular route so selling a $5,000 leg might result in loosing business for a $20,000 retail priced flight. Maybe an empty leg to Altoona or Greensboro would go for less.
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The reason this works is that the people who charter flights can't wait around to get lucky and score a cheap flight. You have to go where it's going and it's still not Airline cheap...

But there are evidently operators that sell the legs quietly on a secondary market... google empty leg...


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Brad Z said:
Another consideration is eroding their existing business by undercutting their primary business. I'm sure that's a popular route so selling a $5,000 leg might result in loosing business for a $20,000 retail priced flight. Maybe an empty leg to Altoona or Greensboro would go for less.
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Exactly. It's not just a sunk cost of fuel and sandwiches and such, it's the cost of de-valuing your other product (other product being the full price leg). What if by charging $5000 for the formerly empty leg, the price someone will pay for the full $17000 leg is now only $13000?

ETA: It only takes a few no-reposition flights to make the $3000 difference add up to a bigger loss. And then your cost goes down more for the $17000 leg. The way to do it is to market the two products differently in a way that doesn't devalue one. Like how pro sports teams put unsold tickets on stubhub so they don't have to lower the face value.
 
Art VanDelay said:
I could take you in my Cub. It's based at Boca. It'll only take us 10.5 hours ! The view from 500 feet agl will be spectacular ! We can even leave the door open if you want - no extra charge.
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That is one sweet ride, I'd take you up on that offer!
 
aggie06 said:
Exactly. It's not just a sunk cost of fuel and sandwiches and such, it's the cost of de-valuing your other product (other product being the full price leg). What if by charging $5000 for the formerly empty leg, the price someone will pay for the full $17000 leg is now only $13000?
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They do it quietly in many cases. You may not know who the operator is. There are matchmaking websites like this. Other operators just list em on their websites.


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gsengle said:
They do it quietly in many cases. You may not know who the operator is. There are matchmaking websites like this. Other operators just list em on their websites.


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Agreed. Hit post too fast and was in the middle of editing my previous post.
 
Shawn said:
Don't feed the troll...look at his posts...he just likes to engage in prop swining contest to feed his ego
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What post in particular was a troll post?


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gsengle said:
What post in particular was a troll post?
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All of it...Ok, MOST of it for Captain Literal...for whatever reason you seem to be more interested in being an argumentative twit to other's thoughts both this thread and other posts rather than offering insight and experience to the topic at hand which is detriment to both this board and the aviation community. Sorry, that is my perspective anyway.
 
Shawn said:
All of it...Ok, MOST of it for Captain Literal...for whatever reason you seem to be more interested in being an argumentative twit to other's thoughts both this thread and other posts rather than offering insight and experience to the topic at hand which is detriment to both this board and the aviation community. Sorry, that is my perspective anyway.
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You don't know me. I've added salient facts to the conversation, that evidently people didn't know. I said "captain obvious" in response to a response that felt troll-y to me. I tried to do it in a friendly was as to say "duh" the question is "why". We all know that it was because the management decided so. But why?

I will never troll. A troll is disingenuous, or sometimes one who tries to shut down conversation or delegitimize someone with the troll card. If I said anything false, then call *that* out...



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gsengle said:
You don't know me. I've added salient facts to the conversation, that evidently people didn't know. I said "captain obvious" in response to a response that felt troll-y to me. I tried to do it in a friendly was as to say "duh" the question is "why". We all know that it was because the management decided so. But why?

I will never troll. A troll is disingenuous, or sometimes one who tries to shut down conversation or delegitimize someone with the troll card. If I said anything false, then call *that* out...



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Seems rather trollish to ask me what somebody I don't know is thinking.
 
MauleSkinner said:
Seems rather trollish to ask me what somebody I don't know is thinking.
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We never speculate as to why here? Ever? I didn't post the original post but I'm curious how the business works. I'm not in it. If you are, let us know and enlighten us as to how those people think. That's not trolling, that's discussion.


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gsengle said:
The reason this works is that the people who charter flights can't wait around to get lucky and score a cheap flight. You have to go where it's going and it's still not Airline cheap...

But there are evidently operators that sell the legs quietly on a secondary market... google empty leg...


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People who charter flights call the charter broker and tell them I need to get from A to B at X time on Y date. The Broker bids that out, and if I have a plane that needs to go from A to B that works with that time frame, I'm going to bid lower than someone else who has to reposition to make the flight. The customer doesn't know he or she is on a repositioning flight or not; they're going where they need to go.

Obviously the shorter the window to fill the flight, the fewer the options, and the greater the cost.
 
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