Revenue vs. Cost to fly the aircraft


#1

Here is a general question, and I know that the cost will vary by quite a bit, so, I am looking for just an average figure.

Just for fun, I often track the United flight 15 from EWR to HNL and the return flight United 14 from HNL to EWR. (Continental if you like)

Looking at the Airline Insight info here I found the following information:

Passengers traveling from Honolulu Intl (Honolulu, HI) (PHNL) to Newark Liberty Intl (Newark, NJ) (KEWR) on United Air Lines (or its operators) paid the following prorated amounts for that one-way ticket during the previous 12 months:

Fare class Restricted Coach Class:

Minimum/Ticket 213.37 Median/Ticket 383.56
Maximum/Ticket 2,975.22 Revenue/Flight 14,262.40
Revenue/Year $ 5,134,499.99

So, if the average revenue for one of these flights is around $14,260 my question is, what is the average cost to the airline to operate the flight, given average flight load, average flight conditions, average weight, etc.?

I understand there are many other factors involved, head/tail winds that may affect fuel used, actual fare dollars paid, upgrades paid, etc, but, surely there can be an average figure available as to what it cost the airline to fly the Boeing 767 aircraft they use from HNL to EWR for the average trip.

I’m sure the revenue also varies depending upon the baggage fees they generate and the meals they serve. I was just on a flight from LAX to ITO, and I am pretty sure there is a markup on the meal I bought, and the $8 I paid is more than likely making the airline money on that same meal!

Thanks in advance.


#2

My question is this, does the $14,000 revenue come from only economy tickets or does it include business and first class revenues? In my mind 14K isn’t enough for an average 10 hour flight.
A few years ago I read where airlines were paying about $5 per meal. Say it is $6 now. I don’t know if they consider food and beverages to be a profit maker but they for sure don’t want to lose money. Some of that cost like water and Coke would be included in general overhead.
Without looking it up I am going to take a wild stab and say it costs an airline $3 to 4,000 per hour to operate a 767.

John in Saudi


#3

Don’t forget about revenues from freight and mail on the same flight.

Where’s Davi… er, um MIKE? He probably has these figures memorized for every type of aircraft and most routes.


#4

A couple other things:

Around $10 of the ticket revenue is immediately lost in distribution costs (credit card costs, GDS costs, travel agency costs, IT vendor costs). Most people don’t realize that.

Most airlines still don’t turn a profit selling food. They might sell YOUR meal for more than IT cost them, but they also loaded a lot of food onto the plane that they didn’t sell and that has to be thrown out after the flight. Also, there are very few companies that do airline catering - they earn quite a bit of money just to load the meals onto the plane (about $1-$2 per meal). Despite the reduction in meals, airline catering is still a very profitable business for those involved.

Looking at it like a charter operator would - just considering fuel, crew, and aircraft time, doesn’t include a ton of the costs that go into running a major scheduled airline.

Freight is a very small portion of total airline revenue (less than 5%). Mail is a very small part of that. Many airlines have decided to stop carrying mail because it’s more trouble than it’s worth.


#5

Perhaps for passenger airlines but quite a few airlines live on freight: FedEx, UPS, CargoLux, etc.


#6

Taxes, TSA fees etc. too.

they throw the food out after a flight?


#7

A friend of mine that flies for AA thinks 18-20K an hour. but he’s not sure.


#8

That probably includes depreciation and income taxes. if they ever make money.


#9

Stop right there. That’s just First Class revenue. Factor in the entire plane and you are closer to $100,000 plus you still have cargo revenues and profits from meals, baggage fees, etc. Fuel alone on this flight could be 50 tons or about $45,000 at current price.

CNBC did a feature on AA a couple years ago, and they broke down AA flight 1 JFK-LAX on a 762.

COST
$18,000 - 28 tons fuel (@ 2009 price)
$53,100 - total cost to operate flight including salaries, fuel, fees, etc.

REVENUE
52,200 - from tickets 300 - from freight (I thought this would be higher)
$ 800 - from food, headsets, baggage fees, etc.
$53,300 - Total Revenue

So on a typical JFK-LAX 5-hour flight, AA claims their profit was $200.

I guess that’s why the airline business is so tough, a lot of personnel and equipment to make a nickel.


#10

That sounds better. About $9,000 an hour.


#11

Yes, anything that’s not shelf stable and prepackaged (stuff like chips and candy and canned beverages) has to be thrown out after the flight due to FDA regulations.

Stuff that can be put back on is pulled off and the drawer is refilled for anything that was sold.

That’s why the airlines use the snack boxes so much - it can keep flying until it sells. Fresh food can only fly once and if it doesn’t sell, it’s lost forever.


#12

Sounds fishy to me.

Think the old adage, figures lie and liars figure comes to mind


#13

When you look at their past financial results, why do you not believe them? Do you think they’re really making tons of money and secretly stuffing the cash under the mattress?


#14

It’s just like a restaurant. You really wouldn’t want the restaurant to make food on Tuesday and sell it to you on Wednesday or Thursday.

Crunching the numbers from transtats.bts.gov/DL_SelectF … 0Financial shows that the total_air_ops_expenses (which I take to be direct costs*) is about $7950/hour for the first 6 months 2011.

The average for all models of the 767, which includes charter and freight operators, is about $8900/hour. Just the legacy carriers of American, Continental, Delta, United, and US Airways shows an average of about $8200/hour. Considering the length of the 767-400 flights, I’m confident the $7950/hour is accurate.

Using an average of 9 hours eastbound (COA14) and 10 hours westbound (COA15), the direct costs are $71,550 and $79,550 respectively. For a roundtrip of 19 hours, the direct costs are $151,050.

The figures for passengers, freight, and mail are available only through May, 2011 so a 100% apple-to-apple comparison isn’t possible. I do think that the load factor mentioned below may have gone up a point or two due to school being out and families taking vacations.

The passenger load factor is ~86%. With a 235 seat aircraft and an average fare of $378, the total revenue per flight (excluding mail and freight) is $76,700. Round trip would be $153,400. The estimated profit for this route (again, excluding mail and freight) is $2,350. Percentage wise that’s a return of about 1.5%.

For completeness, mail and freight during the first five months of 2011 (roundtrip) was 369,072 lbs and 3,184,687 lbs.

Please don’t hesitate checking my figures. Being unemployed :cry: , I have all the time in the world to go over my figures again. :smiley:

*Pilots, cabin crew, maintenance, depreciation, etc.


#15

And that 1.5% margin can easily be eaten up by indirect costs like distribution costs (actually a direct cost but usually not included in air-related), IT, management and management-related costs (like overhead on the headquarters), debt servicing, accounting, compliance, and financing costs.

and by “management” I don’t mean the executives. I mean the thousands of people it takes to run a major airline that are neither crew or customer service nor the high level executives. The majority of these people are paid less than they would make elsewhere for the same job but do it because they love the industry. Most passengers don’t realize how many people behind the scenes it takes to run an airline.


#16

I was kidding about the food.


#17

71Zulu

I saw the show you are referring to. It was pretty interesting. They seem to drill fairly deep in the cost of the flight that was highlighted. Even going as far as breaking down how many seats wre the cheapest to the people who redeemded there miles for a ‘free’ seat . They also showed a flight from Dallas to Hartford and broke down the seat prices on that as well. Not much room for any flight to make money