Understanding Airline Operating Costs
Airlines barely make enough from flying us around to pay for an order of avocado toast.
Profit Margins for Airlines
The International Air Transport Association reports that, on average, airlines around the world are expected to earn a mere $7.69 in profit per passenger carried in 2017. U.S. airlines will do better than others around the globe, earning $16.32 in profits per passenger. However, that amount is still barely enough to buy lunch at the airport.
Where Does Your Ticket Money Go?
When you buy a ticket for $116.32, and the airline pockets $16.32 in profit, naturally, you might wonder: where does the $100 go?
Cost Breakdown
According to Airlines for America, the following breakdown illustrates the operating costs of U.S. airlines based on Department of Transportation figures:
- Labor: approximately $33
- Fuel: around $15.30
- Aircraft payments: $7.30
- Rents and maintenance: $4.40
- Professional services: $8.60
- Food and beverage onboard: $1.70
- Airport landing fees: $1.90
- Maintenance materials during block time: $1.70
Additional Expenses
Airlines also allocate funds for various other expenses:
- Insurance: $0.20
- Commissions to travel agents: $0.80
- Communications: $0.70
- Advertising and promotions: $0.90
- Operational overhead: $0.70
Transport-Related Expenses
Additionally, airlines pay $12 for “Transport-Related Expenses,” which include all non-flight related costs, such as code-shares and running onboard gift shops.
Employee and Other Operating Costs
Employee expenses (beyond salaries) amount to about $2.00 of that $100, which covers travel expenses and professional organization memberships. The remaining $8.60 falls under “Other” expenses, addressing equipment not directly used in flight operations, travel interruptions, and customs fees.
Revenue Insights
According to the U.S. Bureau of Transport Statistics, U.S. airlines had over $36 billion in operating expenses during the first quarter of this year, earning approximately $39.7 billion in operating revenue. This revenue comprises:
- $29 billion from airfares
- $1 billion from baggage fees
- $724 million from reservation change fees
Conclusion
In summary, while U.S. airlines are generating profits, when compared to the financial standing of major corporations like Apple, it’s evident that selling electronics is a significantly more profitable business than operating an airline.
