Forgetting for a moment about supply and demand, how much should an actual airline flight cost, if you consider fuel, employee salaries, food (?), insurance, etc? How much of a markup is there?
I don’t think that this question can really be answered…at least not without something approaching a doctoral thesis. I’m not trying to put the kabosh on the question but am merely pointing out that the factors which determine this are incredibly varied and hard to nail down.
For instance:
How much does an airline charge for a ticket? I sometimes wonder if airlines themselves even have a grasp on all of the pricing structures theyt have going at any given moment. Biy your ticket to Ney York with enough advanced warning and it costs (say) $150. Tell the airline you have to leave tomorrow for New York and it might cost $600. Those are just two examples…there are a myriad other prices to be found and can literally change every few hours.
How much does it cost to fly a passenger? It depends. A 747 is probably the most expensive jet to operate (excepting the Concord perhaps) but if it flys fully loaded it is the cheapest to operate on a per passenger basis. Each jet type has different requirements and costs to operate.
How much are corporate costs (salaries, rent, etc.)? I imagine it is different for each airline depending on how well they are run and the economies of scale different airlines can achieve.
When’s the next fare war? How can United account for times when American decides to nail massive fare cuts to attract customers?
How much does gas cost? The price of fuel is constantly in flux. I’d bet money that airlines hedge and buy massive quantities when they feel the price is favorable but they aren’t totally immune to the effects of price swings.
How much money do they lose from unforseeable effects? A storm between Chicago and New York can ground planes all over the place (I know…it’s happened to me). This can have a ripple effect since the plane doesn’t arrive at its destination in time to move the next load of passengers. This costs an airline money and is unpredictable.
When will the next plane crash and hit an airline with a few hundred multi-million dollar lawsuits? Presumably they have insurance for this but it still costs them money any way you slice it (possibly including lost revenue when people stop wanting to fly that airline).
And so on and so forth…
I’d like to know an answer too and I suppose one could average across all of these (and other) factors to get a meaningful result. Maybe a statistical analysis is useful such as insurance companies do. The specifics are impossible (i.e. who will die when) but broad strokes can be garnered from the data (i.e. men live to be 72 on average). Perhaps airlines do the same (i.e. on average 18% of our flights will be delayed by weather) and adjust their fares accordingly.
Whatever the market will bear.
:sigh:
Aint’ capitalism grand?
I think the number you’re looking for is the cost per available seat mile. Throw “cost per asm” into a search engine along with your favorite airline, and you’ll get the figures you’re looking for.
At current fuel prices, but no adjusting for the new labor agreements that are going through the industry, cost per asm for a big, integrated airline runs from the high 8 cents to the low 12’s. It will be higher for some airlines with lots of short hops, lower for discount airlines which use non-union labor and outsource maintenance.
That number does not include interest, so financing the planes is above and beyond that.
First of all, you can’t “forget” about supply and demand. In a free market economy, all prices are determined solely by supply and demand. Secondly, you’re contradicting yourself; on the one hand you want to forget about supply, on the other hand you want to know how much supply is available (fuel, employee salaries, food, insurance).
Whackamole is right, there are too many variables to really calculate an exact cost for any flight. But, given some basic numbers and a few WAGS, we could do a napkin estimate for a specific flight. These numbers will be precise, but I will not guarantee accuracy.
I just booked a business trip for September from Fort Worth to Washington DC. I’m outbound on a 757 and inbound on a 727. We’ll use it for an example…
From the Air Transport Association of Canada we find the following stats:
727
Number of Seats 150
Fuel (gallons per hour) 1320
Aircraft Operating Cost (per hour) 2567
757
Number of Seats 186
Fuel (gallons per hour) 1063
Aircraft Operating Cost (per hour) 2623
Using these numbers, a 3hr flight and an average fuel cost during that period of some $2.16/gal, the price for the 757 leg costs either $7869 or $14,757, depending on whether the fuel cost is included in the operating cost or not.
(Fuel should be included in the operating cost, along with maintenance, insurance, flight crew, etc, but it doesn’t appear to be, so we’ll give the airlines the benefit of the doubt and go with the higher number. I did call the ATAC to ask, but they had already gone home. Also, the site, being Canadian, probably used Canadian dollars. I don’t know the exchange rate, but this is just a WAG anyway.)
Add a 30% fudge factor for airport fees and other overhead expenses and the outbound leg on the flight costs the airline about $19,184 or $128 per person on a flight that is 80% full.
On the inbound leg, the 727 is going to cost about $22,521 or $188/person coming back. Total operating cost for both legs per person would be $316. The fuel issue is critical here because, if fuel is part of the basic operating cost, we can cut this in half.
The ATAC site has a lot of info on the Canadian carriers. I didn’t see acomparable site for US carriers, but I would imagine DOT might have one. Play with the numbers and find an answer you like.
Oh, yeah, my advance purchase, non refundable coach ticket ran $220. So either the airline is losing money or making about $62 depending on how the fuel costs are treated.
I did pretty good. Travelocity quoted fares from $198 to $757 so I am definitely on the low end of the fare structure this trip.
Whacks himself upside the head.
Apologies to Whack-a-mole for misspelling Whack-a-mole.
The airline industry is so complex that the cost of a plane ticket has less to do with the exact nuts & bolts of what your individual flight costs and more to do with an airlines overall expenses at any given moment. It’s essentially a commodity.
Well, given the fact that lots of airlines have gone broke in the last couple of decades, you probably paid less than it cost. (-:
Old Joke: Do you know how to make a small fortune in Aviation? Start with a big one.
Manhattan is right on the money, but you really should throw in the fact that not all available seats are full. So you may want to look in to “Revenue Passenger Miles” as well. It looks like a decent rule of thumb is that RPM is double ASM. So, if you double the numbers Manhattan posted, you’ll get a good feel for the airlines cost for a given mile traveled.
So, if you travel 1,000 miles, and an average ASM is 10 cents, and average ASM/RPM = 2, the cost of that flight is 1,000 x .1 x 2 = $200
Another factor is that Airlines fly freight as well as people, so there is a concept of Cargo Ton Miles (CTM) as well. I’m not sure which business (freight vs. passengers) is the more lucrative. It’s possible that one effectively susidizes the other so that the cost above is inaccurate.
Err, in the first paragraph, I got that backwards: ASM is double RPM (actually maybe 1.5 is a better ratio).
Formula looks accurate, though.
I’ll take the Boxcar-style approach and toss in some more numbers.
Back in December 1999, none of the airlines expected anyone to be flying on New Year’s eve, lest planes drop out of the sky at the stroke of midnight.
Since planes on the ground don’t make money, Alaska Airlines came up with a neat offer for New Years eve: $20,000 for a 3 hour party in a 737, invite 149 (seats?) of your closest friends.
I don’t know if they had any takers, but the numbers are probably near the break even point for the time.
$20,000 jives with the figures Boxcar came up with. So $20,000 / 150 people comes in at $133 for a 3-hour one way trip. $266 round-trip sounds pretty fair I suppose.
Damn!!!
Why can’t everything be Free???
A few years back, while I was working for a well known British Airline, the Inland Revenue (equivalent of your IRS) attempted to tax staff on their travel concession. Had they succeeded staff would have been taxed on the basis of the cost of flying the plane divided by the number of passengers, thus conveniently supplying data for the OP.
Fortunatly for staff, but unfortunatly for the OP, the Inland revenue failed in the courts and had to tax that particular perk on the marginal cost (i.e. the extra cost to the airline of flying the plane with a staff passenger over flying with one extra empty seat). Since the airline actualy made a small profit on staff travel, no tax was due.
Just to add an interesting bit of information for the conversation:
It cost me US$750 to fly to Chicago return.
For someone to fly here return cost US$1400.
Even with the same airline.
Why such a difference?
dpr
At a guess I would say it costs more either because more people want to leave Chicago than come to Chicago or it is merelt because the airline can get away with it.
I heard a report that internet airfares have actually served to dirve the price of tickets up. Counterintuitive I know…one would think all that instant info would force airlines to drive prices down from competition.
It turns out that they will sometimes raise prices on the order of every 15-30 minutes or so. As soon as they hit a price that is too high sales start dropping and the airline takes one step back and leaves the price there so they maximize their income (with computers watching all of this the airlines are able to get virtually realtime info on ticket sales).
It sucks for us but you really can’t blame them.
Does this surprise anyone?
(apologies to any Chicago residents. This is a JOKE.)
Yeah. I believe that’s the correct answer to this trick question. It SHOULD cost nothing. It DOESN’T, but it SHOULD.
Blackadder: Would you like to earn lots of money?
Frou-Frou: No. I would like for other people to earn it, and then give it to me. Just like in the good old days…
I’d expect a difference in price (and I was really just talking US-Australia and vice versa rather than Chicago-specific) but almost double? For the same service? And if anything shouldn’t it be the other way around with economies of scale?
I would like to understand how priceline.com allows you to get away with slashing ticket prices by such ridiculous amounts. You can easily get 70% or more discount.