Big Plane vs Little Plane (The Economics of Long-Haul Flights)

Big Plane vs Little Plane (The Economics of Long-Haul Flights)

If you’ve been alive for the past ten years,
you’ve surely heard of two planes: the Airbus a380 and Boeing 787 Dreamliner. These two planes have dominated news cycles
worldwide because they’re both intensely innovative—the a380 is the largest passenger
plane to have ever existed, while the Dreamliner is one of the most efficient and has an unrivaled
focus on passenger comfort. Concealed by all the fanfare, however, is
a much deeper story on economics, innovation, and how the airline industry works. So, believe it or not, work on the Airbus
a380 began back in 1988. More people were flying than ever, and airports
weren’t getting all that much bigger. Airbus eyed the success of the Boeing 747
and needed a bigger aircraft to compete. At first, Airbus considered making a super-wide
jet by placing two a340 fuselages side-by-side, but later opted for the design we see today—a
fully double decker jet. An a380 can hypothetically carry as many as
868 people in an all-economy configuration, although the densest in practice is 615 seats—this
is more than double that of the 787. Airbus decided to focus on making a high-capacity
aircraft because they believed in the hub-and-spoke model of aviation. With the hub-and-spoke model, passengers traveling
from smaller airports—we’ll use Hartford, Connecticut as our example—to a long-haul
destination, such as London, England, will need to connect though a hub. In the case of Hartford, passengers would
likely take a short flight to New York, Atlanta, or Chicago to catch their transatlantic flight
to London. Obviously this is inefficient for the passenger. On almost all routings between Hartford and
London, passengers have to fly away from their destination in order to catch their transatlantic
flight. However, for airlines, there’s conceivably
an advantage. Let’s say, just for the sake of explanation,
that there are only six airports in the entire United States—New York, Boston, DC, Los
Angeles, San Francisco, and Seattle. If an airline had one flight from every destination
to every other destination, they would need to run 16 routes. If they just have one hub airport on each
coast, we’ll say New York and LA, they just need to have one route from each secondary
airport to each hub, and one transcontinental hub-to-hub route—five in total. Obviously there will be quite high demand
on the one transcontinental route, so airlines can put a large aircraft, such as the a380,
on that route to fulfill its demand. Since it’s release, the a380 has often been
placed on those long-haul, high demand routes—known as trunk routes. The second-busiest long-haul route in the
world—Dubai to London—sees eight a380’s a day, and that’s in addition to five smaller
planes that fly that route. The Dreamliner serves a very different purpose. It’s a pretty modest size plane. It can only hold around 220 passengers in
a typical configuration. Its composite construction makes it extremely
light and fuel efficient, which helps reduce operating costs. In the late 1990’s, Boeing started to see
slower sales on their large 747’s and 767’s, and started to consider what to build next. They initially looked at creating a plane
called the Sonic Cruiser, which would have had the same fuel efficiency as conventional
aircraft, while flying 15% faster—just under the sound barrier. Airlines were initially enthused, however
after the attacks on September 11th and the rising cost of fuel, airlines were more interested
in fuel-efficiency rather than speed. The 787 delivered on that promise by reaching
up to 102 mpg per seat (2.41 L/100 km) compared to the a380’s paltry 74 mpg per seat (3.16
L/100 km.) The Dreamliner also has an absolutely enormous
range of up to 8,000 miles, and better yet, it’s efficient at that range. Boeing made such a relatively small aircraft
because they believe in an entirely different model of aviation—the point-to-point model. In this model, in order to get passengers
from Hartford to London, airlines just run a direct flight between Hartford and London. Obviously demand would be lower, but there
still is demand. In the past, to fly a route like this, an
airline would have had to use an aircraft with higher capacity than demand because smaller
airplanes couldn’t fly such a distance non-stop. Given that, airlines resorted to the hub-and-spoke
model to concentrate all the demand on certain routes where they could fill large, long-haul
planes. Now, with planes like the Dreamliner, airlines
can fly long routes with less demand while still being efficient. The hub-and-spoke model was also popular in
the past because airlines believed that it was more cost-efficient to fly less flights
at higher capacity. It’s simple economics really. Doing a lot of one thing together is cheaper
that doing a lot of one thing separately—it’s economies of scale. Except that doesn’t really extend to the
airline industry. For a larger aircraft you need more ground-staff,
more flight attendants, more check-in agents, more fuel, more of pretty much everything. The only cost that stays the same is pilots,
and the only ones reduced are gates and take-off’s. When you’re now doing more flights at the
largest, most expensive airports, you end up spending more money. Airports like Hartford, Connecticut are cheap—labor
is cheap, take off fees are cheap, everything costs less than at JFK or Newark. There are just fewer flights to compete with. Not only that, but flying direct flights clearly
costs a ton less because airlines only have to pay the per flight costs that I talked
about a lot in my “Why Flying is so Expensive” video once, rather than twice. United Airlines was a major innovator of the
point-to-point model with their Newark hub. Newark is an airport suited to serve smaller
planes, so United took the opportunity to open up direct flights to smaller destinations
on the British Isles using narrow-body planes stretched to the upper limits of their range. United primary uses the Boeing 757 to reach
smaller destinations like Shannon, Ireland; Belfast, Northern Ireland; Glasgow and Edinburgh,
Scotland; and Manchester, Newcastle, and Birmingham, England. Often the United Flight from Newark is the
only transatlantic flight serving these airports. United is able to operate these routes because
the East Coast of the US and British Isles are just close enough together to reach with
a narrow-body plane. With the 787, airlines are able to open even
longer routes between smaller destinations. Routes like these are called long-and-skinny—long
distance, but skinny demand. These includes routes like Tokyo to Seattle;
London to Chennai, India; Wuhan, China to San Francisco; Beijing to Boston; Nairobi,
Kenya to Paris; Santiago, Chile to Madrid; Warsaw, Poland to Beijing; Doha to Edinburgh,
Scotland; the list goes on. The efficiency of this plane also has allowed
for an entirely new class of airline—budget long-haul carriers. The three main players in this category are
JetStar airlines based in Australia, Scoot airlines based in Singapore, and Norwegian
airlines based in both Scandinavia and London. Short-haul budget airlines have been possible
for a while because of efficient short-range airplanes, but this really is the first time
there has been such an efficient long-haul airplane, so these three airlines use the
reduction in operating cost to offer significantly lower ticket prices, while also using the
principles of budget airlines that I outlined in my “How Budget Airlines Work” video. What’s even more exciting for us consumers
is the upcoming Boeing 737 MAX. This plane is a redeveloped version of the
long-existing Boeing 737 featuring a larger capacity, longer range, and higher fuel efficiency. This means that we could conceivably see super
low-demand routes like Manchester to Cleveland, Lyon to New York, and Belfast to DC operated
in the near future. Norwegian airlines has already hinted at plans
to use to the 737 MAX to open up an auxiliary transatlantic hub in Edinburgh—a relatively
small city. So, the a380 was a failure. Airbus hasn’t received a new order is years,
and it recently announced that it would be cutting back it’s production to only 12
a year. Meanwhile the 787 has amassed almost 1,200
orders. Point-to-point flying has always been better
for the consumer, but with these recent innovations, it’s now better for airlines too. Given that, it’s clear that point-to-point
flying is truly the future of aviation. Alright, I have a lot of things to talk about
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  1. The 737 Max is everything BUT a redeveloped airplane. It is a Frankenstein 1961 fuselage retrofitted with the newest high efficiency engines. Everybody at Boeing that had authority approving this project should go to jail for life! If you value your life or the life of your loved ones, do net ever allow them to step on a 737 Max.

  2. Hahahaha 737 Max, HAHAHAHAHAHA "There are metal shavings in the electronics" the Mcas system is killer, And the design is unstable in flight 30% of the emergency oxygen systems don't work, Sounds like a great plane! that aged well.

  3. 6:36 when you live in San Francisco and watch this video when the corona virus was a big concern you was like "I f*** up"

  4. I love the newer comments either talking about how the max failed so horribly, or how wuhan is probably the most avoided place in 2020.

  5. United Airlines doesn’t Fly to Newcastle, Birmingham, Belfast & Glasgow 👌👌 only to Manchester & Edinburgh

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