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How Airlines Spend Your Airfare

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On an airplane carrying 100 passengers, how many customers does it take, on average, to cover the cost of the flight? This is a fine article from the Wall Street Journal. The article breaks down the number of PAX on a typical flight and shows you where the money goes. My bottom line? Don't invest in airline stocks!!!! (online.wsj.com) More...

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flyenlow44
I believe US Airways made a lot of money on my flight from London to US in May of this year. I watched as they Loaded so much airfreight on to the plane that I wonder if we were over loaded on takeoff.
OhanaUnited
Andrew Leung 1
Agreed. This article didn't mention cargo aspect (both income and expense)
Derg
Roland Dent 1
Are you the same guy who is into the UFO stuff?
gopurduego
Robert Lewis 3
As Warren Buffett once said about investing in airline stocks many years ago... "If I was at Kitty Hawk, I would have shot that plane right out of the sky". His point- airlines perform a great service, but don't make for very good investments.
DCKOZAK
Donald Kozak 3
An interesting eye opener. I have an invoice for a ticket to Europe on UAL. The taxes and fees are broken out into all the component parts. The ticket price seems high, certainly compared to a domestic RT, but looking at all the fees and taxes, US, European, airport, etc, the fees/taxes are about 65% of the total cost!! Now thats worth a closer (media) look see.
homburge
homburge 5
Give me a break - this is a pretty basic piece of reporting. You don't need a hypothetical flight of 100 people to explain the airlines' cost structure, I hope -- all you need is the breakdown of what percentage of costs go to fuel, to salaries, to maintenance, etc. Then you do the same for the revenue side.

The airlines are just like any other business. They (try to) put a product into a marketplace, they have customers, they generate revenue, and it costs them expenses. What's left is profit. Or loss. If they can't make money in their chosen business, and one in which they supposedly are 'experts', then they shouldn't be in the business.

Which is what's really wrong with the US carriers: they simply have no clue as to how to run their chosen business successfully. The first problem is that they don't know how to price their product properly. The second is they have no sense of satisfying the customer or of putting a quality product on the table. The third problem is a lack of desire for excellence in their business. The fourth is customer service: why do they exist as a business at all if not to provide their customer a decent product worth paying for?

It's pretty easy to go on... Yet airline management loves to whine about security costs, or fuel costs, or food costs, or blanket costs, or baggage costs (wait -- they're going to carry the weight of your bag anyways...), or (oh no, here they come again) uppity customers.

My fuel costs have gone up 5x in the last 10 years: $1.25 a gallon to $6. My equipment costs are higher. My annual costs more. My cost to transport me to my destination is up. Even my food cost is up. This is not just me, but this affects the airlines too. Why then, haven't their ticket prices risen commensurately as mine has?

Answer: because the Tilsons of the country don't understand their own business, and don't understand how to price a product that allows them to deliver one of quality.

If the WSJ really wanted to do an expose on this area, they should have focused on pricing and WHY there's only ONE person on the plane paying "profit". That's the real deal here.
preacher1
preacher1 3
Your 3rd paragraph has been an epitath for failure since deregulation, and it matters not what transportation mode you speak of, air, rail, or truck. There were a lot of folks that knew not how to price their product. They never had to because everytimne there was an added expense, whether from the brotherhood, fuel, or whatever, Uncle Sam just let them pass it on. Some never learned how to price their product and they are no longer here. Some did, and in some form or fashion, they are still here, leaning on the bankruptcy courts and a gullible public. It will be interesting to read the final chapter. You would think that after 30+ years it would settle out but it's more like a work in progress.
preacher1
preacher1 2
The other thing to go along with this is that so many CEO's care not about running the business at hand and making it better and stronger. They only look at what they can make for themselves the quickest and get gone, having no long term interest at heart. Whenever boards get the gumption to hire a CEO on a performance(company) based contract, then we may start seeing some changes but not until.
AWAAlum
AWAAlum 1
You must not know Doug Parker.
Derg
Roland Dent 1
The only operators who really know about costs is FedEx, TNT and UPS and of all of them EVA is the master of long haul efficiency.
At6reo
At6reo 1
A perfect example is UA CEO. 10million in his pocket plus
preacher1
preacher1 1
No, I don't know him personally and he has hung around longer than most. His problem right now is that if the court lets AA come out of BR as an independent, he will have a target on his back because of all the talk and interference he has done with the AA union people & creditors. I do know Tommy Horton and he will come out with guns blazing if allowed to do so.
AWAAlum
AWAAlum 1
I worked for him. Doug took over the helm at America West Airlines from Bill Franke around 3 days before 9/11. He's done a yeoman's job and clearly not only knows how to run an airline but cares about it and its employees. I don't know Tommy Horton, but don't doubt your assessment.
preacher1
preacher1 1
Curiosity: When did you leave out there and are you working anywhere now?
AWAAlum
AWAAlum 1
Recently retired with the current title Proud New Grandmother. But Doug still stands as a paragon in both his professional and family life. My office windows looked out on the final approach, and I sat watching the planes returning to Sky Harbor thinning and thinning as air traffic shut down that horrific day, in a numb state of shock, just 3 days after he stepped into the top spot. He not only kept the company afloat during the most difficult of times, but he grew the company and is still with it today. He cares - he cares about it all.
preacher1
preacher1 1
You can't deny the length of time. One wouldn't stay that long if there was not some feeling, but where is all the animosity coming from between the 2 pilot groups?
I can relate to the Grandparent bit. We just had our 2nd grandson last Tuesday. Little bit of a scare as they transferred him to Childrens Hospital in Little Rock, but he came home Friday all OK. 10lbs8oz at birth.
AWAAlum
AWAAlum 1
Can't speak for the pilot groups as I'm no longer privy to events. If I had to guess, I'd say it's likely something to do with merging the two groups seniority-wise. You know, if you're at 75 currently, but the merge puts you at 230 - that's not a happy pilot. It's not a simple process, nor one where everyone is going to be satisfied with the final agreement. But there's light at the end of the tunnel, for at the outside date, when the contract becomes amendable, things can change. The word animosity is a surprise to me though. Typically he's a very level headed guy who has a really easy-going way of working through issues. I can't begin to explain animosity, although it wouldn't surprise me when I begin to run through all the possible scenarios in my head of the things being discussed in those meetings. My only hope is that they come through it with a healthy relationship and a profitable smoothy run team. I'm not sure if the F/As have the same unions - but the process will be repeated with that group as well. No one said it would be easy.

And yeah, i've heard it before but never quite got it - grandparenting rocks.
preacher1
preacher1 1
Well, from what I have been told, it is outright animosity on the part of the pilots and it seems to be from the AWE pilot. I don't think the FA's are experiencing that. Like I said, just curious. ttyl.
AWAAlum
AWAAlum 1
PS-Grinning from ear to ear re 2nd grandson. 10/8 - welcome to your teenage grandson! lol But truly and seriously - Im thrilled all worked well. My parents retired to Hot Springs Village, so I've been through Little Rock numerous times.
AWAAlum
AWAAlum 1
No surprise - Someone's knocking #1 down a notch and then the domino effect follows. No one likes losing hard earned seniority. But - it may very well be other more complicated issues. I'm not there so I'm only guessing. My turn for curiosity: are you grouping America West AND the USAir pilots together and referring to them as AWE (or AWA) pilots? You have to remember they've all been through this before and it's probably still very clear in their minds and just plain don't want to do it all over again.
preacher1
preacher1 1
Well, kinda grouping them but it has been about 12 years or so since that merger and they are 2 independent groups, East & West I think. Don't know how it's working out as far as fling and who's doing who to what but there is otright animosity, seems to be between the 2 pilot groups themselves, not the company. Oh Well!!
AWAAlum
AWAAlum 1
Not to split hairs, but the shareholders and the US Bankruptcy Court for the Eastern District of Virginia approved US Airways' emergence from bankrupty, allowing the merger to close on September 27, 2005 (not quite 7 years ago). The consolidation of operations began and weren't fully operational until late 2008. My point is it's actually only been 3 years, not 12. So it's a lot fresher in the minds of the pilots who were involved in the merger.

Enough said - I think, don't you? This entire issue re airlines spending money has been beaten to death.

Enjoy those grand babies!!!
bishops90
Brian Bishop 1
I thought the greedy CEO's got ALL the money and made everybody work for free. You mean they actually have to PAY for stuff???

(It's a joke people.......)
Derg
Roland Dent 1
"fine article" total BS
klimchuk
If flight is full then last seat will go for much more money than $160
preed66617
Pat Reed 1
I beleive I remember there was a study or evidence that there is a fuel savings when the aircraft were not flying billboards. Take off the fancy paint job and save some weight thus fuel dollars.
Jeraboam
Jeraboam 1
Just to add to the confusion and frustration of air travellers, I am including two flight options from Toronto with Air Canada: one to Italy and one to Hawaii, same dates. YYZ to FCO return: base fare is $1 004.98; taxes, fees, charges add approx. $525 for TEN items, including $416 fuel surcharge. Total of $1529.12 Flight duration of 18+ hours total.
YYZ-YVR-HNL return: base fare $818.00; taxes, fees, charges $130 approx. for TEN items, including a US Agriculture fee (!) and fuel surcharge of $15. Total $947.87. Flight duration 26 hours total.
It appears that the base fee to Europe doesn't include the cost of fuel!!! The 50% longer flight to Hawaii costs about 4% of the European flight for fuel!!!
jal747
sean averre 1
With an average of less than $160 left over for the airline, I honestly wonder how they get soooooo much money, like enough money to buy new planes and stuff to spend money on.
devsfan
ken young 1
For the most part, carriers do not make much if any profit flying people. The money is in cargo.
Here's the rub, adjusted for inflation post deregulation fares are much lower than they were 20 years ago.
ArthurNetteler
I retired in 2007 after 32 years in the air. I worked the last 9 years with a Cargo ONLY Airline. Our index income per flight kilogram was 8 times what it was for a Passenger kilogram. And we had 2 Flight-crew compared to 4-5 Flight-crew on Passenger flights. My income was far more stable during those 9 years, and I had no issues with Passengers to deal with! One more thing for those other retired Pilots out there... You do not have to stop flying, I found a whole world of Ferry and Private flights opened up to me (on my schedule) when I looked into it.
Tanman321
Tan man 1
Funny. Airfares from North America to Europe in 1979 used to cost me $600. 33 years later, a gallon of gas went from $0.86 a gallon to $3.50, a house went from $58000 to $300000 but you can still fly from North America to Europe for $600. We are getting a great deal, and airfares deservedly should go up.
WALLACE24
WALLACE24 1
Apparantly most of their pricing is dictated by the competition or they wouldn't be losing money on many of their routes. Just too many people want to be in the airline business.
jetfuelburner
Mike Keller 1
Good good point. This article totally misleads the public as to how airlines make money. Read it from a laypersons viewpoint and you think the airlines have to fill 100% of their seats to make any money.

This is the kind of journalism that keeps the public from knowing how things really work. It's a sham.
WALLACE24
WALLACE24 1
Of course the price of the ticket is the pivot point. Any raise in that price goes to profit.Duh! If you want to make more you either cut expenses or raise fares. Duh! They should already know from their financial statement what % each expense represents of revenue. Duh! For this we need a consulting firm?
jal747
sean averre 1
With an average of less than $160 left over for the airline, I honestly wonder how they get soooooo much money, like enough money to buy new planes and stuff to spend money on.
zstowell
I think what bothers us the consumer the most is getting nickeled and dimed once we arrive at the airport until we land at our destination. Why can't the airline price their tickets so that once we buy our tickets, that's it. We won't need to pay baggage fees, in flight food fees, drink fees etc. I don't know why airlines get away with it.

I mean when I rent a car I don't get charged if I'm going to put luggage in the trunk. It's rediculous that the airlines as so busy undercutting each other that they have to hit us up with rediculous fees to turn us a profit. After all the fees are said and done I've paid close to $70-$80 more than the ticket was. And that's not counting all the taxes that get added in during the purchasing of the ticket.
preacher1
preacher1 2
Well, I retired in 08 after 35 years, all 135 with 707 and 757/767, with an occasional King Air in the mix. That fill in is out there but you can't get some of these younger line dogs to look for it. Just like today, I was back filling in for my ex employer cause one guy was on vacation. We got cancelled at the last minute but still yet it's there if you make yourself available for it and let people know you are there.
npog99
Tan Man's get this... A starting flight attendant salary at a large, global airliner is roughly $18,000 a year, and not much higher than that for the following five years. Around $18,000 is also the salary of a starting co-pilot at a commuter carrier. Something is very wrong with that.
AWAAlum
AWAAlum 1
Thank your unions.
preacher1
preacher1 1
There is a thing called paying your dues but that is pathetic. We start disptchers in training at about $21000 at the truck line and they are home every night. Besides being pathetic, they are very unequal in reference to the training involved.
preacher1
preacher1 1
AWAAlum
AWAAlum 1
Yeah but do they get paid to fly to exotic places? lol
preacher1
preacher1 1
Don't know about the FA's but an RJ pilot sure ain't gonna see any exotic places. Different, yes, Exotic, no.LOL
AWAAlum
AWAAlum 1
What I meant was, it's the unions that negotiate your salaries.
AWAAlum
AWAAlum 1
Very true. I was pointing out that flight attendants actually do have some benefits along with the low salary. Most people who apply as a F/A really really want to fly, to travel. It sounds romantic to them. And, given seniority, they do get to fly to exotic places. It just takes time - as do most rewards. Instant gratification is rare, at least in my humble opinion.
npog99
Not during bankruptcies where salaries got cut +-30%. And, Donna... Yes, it is all so romantic! You barely have time to rest and get ready for your next flight. Who cares where you are?! It is all the same to us since mostly all we get to see is the restaurant next door to the hotel. Perhaps you are describing the job as it was in 160s-1990. Today's flight attendant work in cost cutting operations. No time for layovers.
AWAAlum
AWAAlum 1
I totally get what you're saying - still - I'd rather have a paycheck that's down 30%, than no paycheck at all. Also, oddly enough, I just got off a plane in Maui a few weeks ago and the F/As did, in fact, have a layover. Nothing is as it once was, Nicholas. Be grateful for what we have and pray it will get better. Viewing the world with hope rather than negativity always helps. (And it's better for you!)
gopurduego
Robert Lewis 1
sometimes I feel like I work for free :\
preacher1
preacher1 1
Well, I think it all goes back to what we both said yesterday. Don't nobody know how to price what they have and wanting to keep the next man under cut.

Outa here. They moved up our depature to LAX this afternoon by a couple of hours from 4 to 2, so I'm getting around and getting readu to head to KFSM. It's already 92 out there this morning with not much wind; probably 100+ at takeoff. Ought to be fun on 8 grand.lol
homburge
homburge 1
Interesting way to put it. I've wondered if you could make work a system whereby you price to break even on, say, 70% of the seats sold. Then you'd have plenty of room on board to a) provide a decent experience to the customer; b) handle the extra loads created by weather, mechanical problems and even people who change their plans; and c) make a tidy profit on those routes where you consistently fill planes (LA-NYC e.g.).

The mentality of trying to fill out the demand curve exactly coupled with shaving costs to the bone is what creates a bad business model.
preacher1
preacher1 1
I guess a lot of $160's , huh? LOL
WALLACE24
WALLACE24 1
And who's problem is that? Duh!
bradygt
Brian Brady 1
When you rent a car it doesn't cost the car rental company extra for you to put luggage in the trunk either. That's the difference.
I do here more people complain about this than anything else, but I like it. Pay for what you use. Why should I have to pay more for your luggage if I'm not bringing any or your food if I'm not eating?
Derg
Roland Dent 1
The trick is to buy the planes cheap and get lifetime guarantees. JetBlue does exactly that with the A320 fleet. Win Win deal..license to print money.
jnavratil
John Navratil 1
Remember People's Express. You carried your own bag to the plane. Can't do that today!

There are expenses not covered here including that the regionals (Southwest) make money and the majors don't. Unions are a factor.

I, personally, view flying as something to be avoided at all costs and I used to be a Continental Gold frequent flyer. I'd pay more to fly if it weren't that I'm a big guy and can barely fit into the seats. I don't flab over the arm rests, but my shoulders are at least 4 inches wider than the seat.

I'm no marketer, but the pitch that would lure me back into the plane would go something like "It may be hell to get onboard, but it's heaven while you're here." Instead we have cattle chutes from start to finish.
WALLACE24
WALLACE24 1
Maybe all the pax are skinny!!lol
Have a safe trip.
preacher1
preacher1 1
Well, I got in a big hurry like always. Sitting here and waiting. Other guy done has the bird ready and all done. Probably going to let him take it out anyway and I'll bring it back. Temp ain't bad, light wind. Ain't but a dozen going pklus us 3 so even full of fuel, we won't be anywhere near MTOW.lol. I'm going down to the local greasy spoon for some lunch.later.
AWAAlum
AWAAlum 1
Does that lifetime guarantee on the plane extend to the next owner or if its leased out? Lifetime guarantees are practically unheard of today especially when you consider how many years a plane is in service. Don't know how they can do it. How encompassing is the guarantee - what does it cover?
Derg
Roland Dent 1
They could have a bird strike once a week and still be covered. Down time is recompensed also. It was the dream contract for JetBlue. Google JetBlue, Rolls Royce, Airbuse A320, contarct. All on line. Used in MBA schools as a perfect stitch up..ahem..
preacher1
preacher1 1
I'm not sure of the details but way back yonder, I remember Jet Blue touting some kind of deal with Airbus, BUT, this was when JB was starting up and AB was trying to get a toehold here in the US. The did something that was very good for the Airline.
WALLACE24
WALLACE24 1
Definition of lifetime??? Most airlines have leasing co or holding co. Planes not in name of airline. Airplane could stay in that name and be leased elsewhere. I don't believe it it is what it sounds like.
WALLACE24
WALLACE24 1
Guess the n# is blocked?
AWAAlum
AWAAlum 1
I think you're right. I know I read online of X number of orders by X airline for a new plane rolling off the assembly line, but to the best of my limited knowledge, the newer planes in our fleet were leased.
preacher1
preacher1 1
Naturally; worldwide consulting company don't want nobody to follow them.lol. They have all 3 birds blocked and us under secrecy contract as to who/where.They are all on the way down, what we just heard so we may get off a little early. And to boot, here I am going out there and my sons phone has ran out of juice so I can't get any word from him on the baby. Last we heard this morning, all was OK and he might get to come home today. All I know right now. I'm outa here. ttyl
preacher1
preacher1 1
both engines up, 200 yards from the runway and #1 in line and no inbound to wait on. It was gonna be beautiful, just swing the corner and shove the coal to it. Email from the office to us...Meeting cancelled. Rescheduled til next week. Boss man said take her back in and park it and let's go to the house.b Had a text from my boy when I turned my phone back on, Baby released, fixin to be headed home. I guess I know what I'll be doin for the weekend now.lol
preacher1
preacher1 1
You know, that secrecy thing has bothered me for 35 years. I've got thousands of pictures from everywhere and of all the planes we had plus what they have now. Nothing is marked other than that tail# but I'd lose my retirement and called up on charges by them if I even posted one on FA, BUT, the money was good and so is the retirenment so I guess I'll live with it.LOL
Derg
Roland Dent 1
For sure Wayne they wanted IN. They were left alone by the US authority who handles unfair trading. Now RR have to invest in a complete new manu facility here...big time money... in the UK to compete with GE. GE has the ball at the moment. As we know that RR T972 engine explosion on the A380 at Changi, the Qantas accident..opened up a can of worms. At the moment RR are begging for military contracts to raise the money. China, India and Russia are all hard on our heels to produce.
I would like to thank the managers of this website for allowing me to continue posting. The comments I make have ensured my removal from many sites.
WALLACE24
WALLACE24 1
Bad news, good news scenario!!!! I'm sure you were looking forward to the flight. Oh well, enjoy the baby for the weekend.
Derg
Roland Dent 1
Look up that contract on line.
Derg
Roland Dent 1
Wayne you are the only guy on here who knows of what he poats.
preacher1
preacher1 1
You just keep on laying the truth out there. Some may not like it but it's good to keep trak of what's happening across the pond
WALLACE24
WALLACE24 1
Rules is rules. And don't bite the hand that feeds ya. Only planes I ever watch is a couple NASCAR guys. Then I know where the race is at. I don't care where any company goes but I'm sure someone has an interest. Lol
WALLACE24
WALLACE24 1
I guess it's easy to be a big boy when you get government (taxpayers) money and backing. lol
preacher1
preacher1 1
Nnah! There are some others. You just got to wade thru the crap sometimes, AND, there are some that just don't think or read everything all the way thru, AND, there are some that may actually have a different opinion! Imagine that!LOL.
preacher1
preacher1 1
Unfortunately they do. I know of about 1/2 dozen name brand corporations that that have their birds blanked, and like these, nothing but the tail#. Are you going up for the cup race tomorrow nite or just watch it from your recliner?
WALLACE24
WALLACE24 1
I'll watch from home. I only go occasionally because it's kind of a hassle. I don't like hassles much anymore. Lol
Derg
Roland Dent 1
Gneral question here...I too am "senior" in my age..could you recommend this Lasics eye thing?..I know it is popular in USA but not so much in EUR. So would you have it done? My far sight is Ok but close stuff is BAD.
Derg
Roland Dent 1
Right On! AB wants to build a factory in the USA, not sure where though. Prolly where they get the best deal from that particular state, will pacify the politicians who complained about unfair business practice.
preacher1
preacher1 1
I guess ya'll got power up there this morning. I see KY on that big blackout map?
preacher1
preacher1 1
I can't answer. Lot's of friends have had it and done real good with it. Dr. needs to be exerienced with it though. I wear trifocals and can't even wear contacts, let alone have that. I think that if you have just one correctible part like you say you do, it can be OK. I'm not an eye dr. but I would think a consult with an opthamologist and maybe contacts would be a good first step. Like I said, when you get into multiple corrections needed, it may not be an option.
WALLACE24
WALLACE24 1
Talking Alabama. Now the French worker want guarantees it won't affect their employment.
WALLACE24
WALLACE24 1
My a/c is doing fine---so far. 108 isn't that hot anyhow. Lol
preacher1
preacher1 1
Well, they were showing 85 ar KRUE about 1 hr ago. Projected for 104 in LIT today. Been 4-5 degrees hotter up here, so we'll be about the same probably. At any rate, that's too hot. We are going over to the boy' about 5 today for a little grillin and baby holding. I may or may not see that race.lol. Out a here awhile.ttyl.