Airline Cost Structure

6) Airline Cost Structure 19

A) Direct Operating Cost 20

B) Indirect Operating Cost 22

C) Overheads. 23

7) Cost Comparison parameters and profitability analysis 26

A) Costs per aircraft km, Seat km and tone km 26

B) Profitability and the break-even load factor 27

C) VOLUME V/s TRAFFIC 30

D) Profit Analysis 32

E) Marginal Costing and Break-Even-Point 33

8) Cost Controls 37

AIRLINE COST STRUCTURE :-

a) Direct Operating Cost

b) Indirect Operating Cost

c) Overheads.

a) Direct Operating Costs are incurred as a direct result of the operation of a specific service- for example The Fuel, and oil consumed on a flight

b) Indirect Operating Cost are incurred for a whole period of time such as an operating season - for Example, pilot salaries must be paid even if a specific service is cancelled.

c) Overhead costs are incurred for even longer, such as buildings or the management of the airline.

A ) Direct Operating Costs

Direct Operating cost occur if and only if a given flight is actually operated

Within the airline industry there are two types of direct operating cost

I ) Aircraft Related Direct operating cost

1. Fuel and Oil :-The fuel costs for any given operation are based on price of fuel and fuel comsumption Characteristics of the aircraft involved.

2. Maintenance (Exculding in-house labour) :- Maintence costs are affected by several factors, including the following :

 Price of comumable Spares

 The time between overhaul on the airframe, engines and components

 The failure rate of various components

 The manpower effort required to perform the various maintence tasks

 The cost of labour

 The cost of getting the aircraft or components to the overhault locations

Maintence

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