market sizing: Avg price of flight ticket in a country? How to calculate?

Kiga asked on Aug 26, 2019 - 1 answer
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Ivan replied on Aug 30, 2019

A few thoughts on this:

  • Price differs by airline: full service carrier vs. low cost airline
  • Price differs by flight duration: short flight vs. long-haul flight
  • Price differs by booking class: first class, business class, coach
  • Price is dependent from available alternatives (trains etc.) and geography
  • Price is connected to free disposable income and willingness-to-pay

Calculation scheme:

  • Let's assume any European country.
  • Price indicated as round-trip tickets.
  • European flights:
    • Coach:
      • 50 EUR for low-cost airlines (Ryanair)
      • 150 EUR for full service carriers (Lufthansa, BA)
    • Business:
      • Let's assume low-cost airlines do not have business class.
      • 300 EUR
    • No first class on European flights
  • Medium/long-haul flights:
    • Coach:
      • Low-cost airlines: 600 EUR
      • Full service carriers: 1,200 EUR
    • Business:
      • Full service carriers: 5,000 EUR
    • First:
      • Full service carriers: 10,000 EUR
  • Let's talk about proportions:
    • Percentages by Coach/business/first:
      • European flights: Assume an average jumbo jet has 40 rows, 5-6 rows are dedicated for business travellers. Which leads to:
        • Economy: 85%
        • Business 15%
        • First 0%
      • Medium flights:
        • same as above
      • Long-haul flights: Consider 777,787,A380: 600 passengeer seat capacity on average per flight. 40-60 passengers in the business class (10%). 5% in the first class. Which leads to:
        • Economy: 85%
        • Business 10%
        • First 5%
  • European flights are dominated by low-cost airlines, therefore:
    • Average coach price will slightly above the price for the low-cost airlines, e.g. 80 EUR
    • Low cost carriers provide no business class, therefore the business class ticket will cost on average 300 EUR
    • The average price on European flights will be therefore: 80 * 0.85 + 300 * 0.15 = 68 + 45 = 113 EUR
    • Sanity check: average price on German railways is between 50-200 EUR
  • Medium and long-term flights are more dominated by full service carriers
    • Average coach price will be somewhere between 600 and 1,200 EUR. More on the upper bound: 1000 EUR
    • Business class ticket will cost on average 5000 EUR
    • First class: 10000 EUR
    • Which leads to 1000 * 0.85 + 5000 * 0.1 + 10000* 0.05 = 850 + 500 + 500 = 1850 EUR
  • Consider now the split between European and medium/long-haul flights. Local flights have significantly higher frequency at the airports, therefore we assume 70% of flights are European flights. Which leads to 113 * 0.7 + 1850 * 0.3 = 79.1 + 555 = 634.1 EUR

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