A Breakdown of Flight Economics

Plane in flight

With passengers facing increased prices for flights, many people are questioning why flights cost as much as they do. Airlines are striving to get the balance right between making adequate profits and not outpricing customers out of flying. There are so many costs involved in operating as an airline and the actual flights are just one aspect of that.

Here’s a breakdown of the main costs that are contributing towards the cost of flight tickets:

Fuel

Fuel is one of the largest costs for airlines and with fuel prices increasing by around 150% in the last year, this is the biggest concern for airline companies. Fuel prices are fluctuating all of the time and the fuel costs per flight will depend on distance, the type of jet, load, weather conditions and many more factors. As an example, a B747 Jumbo Jet flight from London to New York would cost over £50,000 in fuel based on the current fuel prices.

Employee salaries

Airlines have to employ a large number of staff in order to operate, including pilots, flight attendants, ticket agents and ground support. As well as paying salaries and additional benefits to staff on payroll, most airlines will pay contracts for cleaners, caterers and baggage handlers. Studies show that around 35% of an airline’s operating expenses are spent on staffing.

Fleet ownership and maintenance

Plane re-fueling

Purchasing or leasing, storing and maintaining aircrafts accounts for a large proportion of the operational costs for airlines. Many airlines lease their aircrafts to keep costs lower, as buying a basic Boeing 737-700 plane costs upwards of £70 million, while other aircrafts will cost considerably more. Leasing an aircraft will usually cost from £350,000 per month, depending on the aircraft model. Replacing parts cand regular maintenance an also be very expensive but essential costs to ensure that aircrafts meet safety regulations.

Taxes and duties

Like any other businesses, airlines must also pay their required taxes and duties, which will be calculated based on their profits and other tax details.

Miscellaneous expenses

Airlines will also have lots of other relatively smaller costs such as insurance for lost luggage add leasing desks from the airport.

Airlines have been facing severe disruption in recent years with pandemic travel restrictions and are still recovering from the financial losses from that period. Now with fuel price increases to deal with as well, airlines must identify as many cost saving opportunities as possible.

Many airlines are utilising technology to help reduce costs by using a wide range of tools and digital solutions that can drive operational efficiencies. Lomature and Promeus software can help airlines to operate more efficiently by identifying smarter ways to manage catering plans and other in-flight services.

Through intelligent systems that monitor and report on catering management, the software enables airlines to save money while also helping to deliver a better quality of service to customers. Using a sophisticated Galley Planning tool, Lomature can streamline each galley load and keep waste to a minimum.

Find out more about Lomature and the other solutions that are available from Promeus.

 

The Financial Times created an in-depth article about fuel prices – read it here.

 

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