Stoich, there are some correct things but some incorrect things in your post, that I'd like to address.
4. Unfortunately the change is brought on by a false assumption that my strategy is based on a "skewered" network towards long flights where I have benefited from an advantage for long flights built into the mechanics of the game. Pretty much all mechanics in the game have a bias towards short haul flights. Plane costs, fuel usage, price to space ratio (though there is a miscalculation here, but I'll explain below), initial investment and so on. Specifically ROI on long range routes is much lower then short or medium routes.
There is a couple of mechanics though which were implemented for that purpose that in reality cause the exact opposite and they're limit on basses and routes, especially intercontinental routes.
What in essence happens is, because each airline can have only a very small and limited amount of intercontinental routes and because if you want to grow beyond a certain point you need to utilize those to the maximum as well as the very low margins for them overall, everyone is looking to setup routes with no competition. On the other hand because they're so few in relation to other routes, there is a high demand for them and low supply, so in the absence of competition the prices are driven towards their high end thus making them highly profitable. There is a catch however, one needs to be able to deliver the sufficient traffic to them to realize that profit.
It's a little more complicated than this.
First, it's not just the supply of intercontinental flights, but also the demand function for them. Passengers demanding IC flights have a much higher willingness-to-pay in the demand model.
Second, the need for feeder routes is not as large as you suggest. The preference for connecting within-network (versus between airlines) is
roughly $25 off the price of the ticket. If you are running IC routes, this is a small fraction of your margin and you can be totally viable feeding off of other airlines' connecting flights. In addition, the major IC routes have a large amount of viable passenger volume just for the direct flight.
This situation is exasperated further by the requirement of rep points for base expansion and in the way they can be squired with new or younger airlines basically having little ability to do that and thus being even further limited.
I took advantage of a couple of things to escape the trap and manage to grow quite quickly over the past 5 weeks to the point of being on the verge of challenging the top 3 airlines in the game. First that was identifying the key bases that were underutilized or not at all and developing those into a network that has an advantage over most. Those are SFO, Newark, Narita and Amsterdam. The second reason is that I applied and was accepted in the #1 alliance relatively early in the development of my airline and the 20 rep bonus speeded up my growth. Most importantly however and the main reason for my quick growth was the introduction of the used plane market which is somewhat flawed. I tried to point out some of the flaws in it from the star, in any case it has allowed me to expand operations much faster and with a much quicker capital turnover.
The first advantage is really, really huge and can't be overstated enough. ALEX had similar profitability numbers at its peak before its markets became saturated (and before it deliberately sacrificed some profitability for certain stretch goals in terms of reputation).
Never the less while my profitability was good and I reached 155 mil in cash flow weekly, which is about 90 mil profit weekly (before plane replacement costs), it was still no more then 6-7% profit margin overall, which while good is by no means huge. In additional the profit margin has been going down and not up as I've expanded. Having the 4 most profitable routes was and is misleading as my network was and is built to generate trafic which then generates the profit at the intercontinental (connecting) routes while the rest are not very profitable. Simply put I was taking low margins or even losses on many routes specifically to feed the long haul ones where I would generate the profit for all of them together.
The reason the profitable routes list is misleading (and why I've never bothered to really compete on it) is actually
because of service funding.
Under the old formula, if you were running 100% service quality then you were effectively subtracting $200 extra per ticket from your profits on each route - which on really big routes is, obviously, enormous. But this is applied on the income statement, not per-route, and so high-service-quality airlines have wildly overstated profitability on their individual routes.
Mentally, when evaluating routes I would always subtract the effective per-passenger ticket price from the nominal route profit in order to determine whether to cut the route for being unprofitable. When I was running a service quality of around 65, this was about $85 per ticket.
What this actually meant was that a
lot of people were running domestic routes that looked a little profitable but were actually horrific money sinks. If each passenger is costing you $200 in service quality, then a $350 ticket for a shortish domestic route is mostly absorbed by that overhead. It did create a real structural advantage to the big IC routes, well above and beyond the route limit.
This also combines with another fact of the game, which is that a route quality over, IIRC, 50-60 does
nothing for your pricing power on domestic routes. Up until that point each point of quality gives you the ability to add an extra 0.5% to the ticket price.
They will not help short haul routes at all and most likely will hurt them in the long term when the system has adjusted to the changes introduced. The reason is simple it makes airlines that focus more on short haul flights less competitive and turns them into feeder airlines exclusively. This will happen because if they run a higher service quality to be competitive against other airlines with long haul routes they will be unable to setup and run the long haul routes to take advantage of the passenger volumes as their costs will spike up very quickly and force them to lower service quality and loose their advantage on short haul flights, cause them to loose slots if they lower costs as well which means huge investment into higher bases and higher costs for basses. On the other hand long haul flight airlines once they adapt to the changes, lower investment will get even less competition and be able to charge the same or even higher prices while lowering costs for service. The reason is simple the bottleneck in intercontinental routes remains and it is due to the mechanics of the game though not the service quality one.
I do not think short haul routes are hurt by this; I think they gain a significant advantage. However, the problem with loyalty and slots remains pretty serious and I think that needs a fundamental rework of its own, in part because of the way condition effects it. To be honest, at this point I think that the loyalty effect should be removed and bases should give a flat %.
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