average passengers pay $100 fares and will travel 500 kilometres; the revenue per revenue. passenger kilometre (RPK) will be $100 divided by 500 = …
slack scheduling. This may affect unit costs since the aircraft are under-utilised. Hence, their unit operational costs will be higher. 12.3.3 Landing Fees These charges are levied by airport authorities for the airport facilities and services that they provide. It is common for charges to be divided into two categories at most airports – a fixed
Aug 01, 2014 · The factors that affect utilization rates include: Airplane availability: the total number of days in a given period minus downtime required for airplane maintenance. Average elapsed time per trip ...
available seat mile is the fundamental unit of production for a passenger-carrying airline. A unit in this case is one seat, available for sale, flown one mile. ASM = Σ i =1 to all flights (Number of Seats (Flight i) * Distance Flown (Flight I)) RASM – Revenue per Available Seat Mile is a commonly used measure of unit revenue for
Cost levels are directly related to the number and type of aircraft, in a given fleet. As previously discussed, an airline with a small fleet (i.e. less than five units) will proportionally incur higher costs in certain areas, in terms of spares and crew; than an airline with a larger fleet. There are also other costs that may be related to having a small fleet. The smaller airlines are expected to have an adequate provision for standby capacity or schedule recovery. Furthermore, in-house functions (for example; maintenance and pilot training) may not be conducted by small airlines. They will have to purchase these services from external agencies, usually at very high costs.
In some specific circumstances, an aircraft’s block speed can have an impact on whether or not a crew over-night may be required. Crew salaries are usually treated as indirect operating costs.
The airline marketing managers need to have a good understanding of the airline’s cost structure. Therefore, this chapter provides an overview of the aircraft operating costs, as it explains how they are usually allocated. Of course, accountancy practices may differ from one airline to the next, and the cost allocation methods, and the headings under which these costs
The airlines’ marketing policies are influenced by costs and expenses which could influence their levels of service, and their ability to be profitable. Their direct and indirect operating costs are affected by sector length; utilisation of aircraft, fleet size and labour costs, among other issues. Moreover, the aircraft design characteristics, such as aircraft size, aircraft speed, age of the aircraft, crew complement could also affect the airlines’ cost structure. Furthermore, the airlines may have overheads, including; sales costs, administration, accounts, general management and employment costs, among others. Therefore, this chapter provides a detailed overview of airline operating costs and explains how to analyse their profitability. Initially, it introduces its readers to the airlines’ direct and indirect costs, as well as overheads. Afterwards, it deals with cost comparison parameters and metrics.
The direct operating costs occur when flights are actually operated. Within the airline industry there are two types of direct operating costs; aircraft-related DOCs and traffic-related DOCs. The main difference between the two sub-sections of direct operating costs is that aircraft-related direct operating costs are relevant to the type of aircraft being operated. For example, the budget carriers may keep their maintenance costs down as they operate the same type of aircraft. This way, they lower their direct operating costs. The traffic-related direct operating costs are independent of the aircraft type.
Aircraft can be bought outright or acquired through loans or leasing agreements. In all cases, some form of regular payments is involved (for example; loan repayment, or payment of leasing charges). All of these payments are categorised as indirect operating costs. With regard to the leasing of aircraft, a lease charge replaces the depreciation and interest charges. Provision for major spares comes under the heading of depreciation. In the case of small fleets, the spares cost per aircraft is actually higher than it is for large fleets. This is because, regardless of fleet size, there is a certain minimum requirement for some items. Most of the standing charges are directly related to aircraft purchase price.
Most of the long-haul aircraft may usually require a third crew member and sometimes a fourth for rest purposes. Other factors could influence the total number of crew which may be required for any given schedules. Such factors include scheduling, crew work rule and productivity. Crew numbers are usually influenced by the size of the airlines’ fleet. In some airlines, crew salaries are established in accordance with a productivity formula. It is quite normal for the pilots of the larger aircraft to command higher salaries.