What Will It Take for Airlines to Break Even on Airfares?

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Includes: AAL, DAL, JBLU, LUV, UAL, UAUA
by: Robert Herbst

Fuel cost is down and airfares with fees are at all time highs. So what’s up with that?

Actually, jet fuel costs for the 3rd quarter were still at historical highs for most of the quarter. The 4th quarter will show lower fuel expense offset by less traffic.

In my analysis of the 8 largest airlines for the recent 3rd quarter, only two carriers had an average airfare that was higher than their average cost of that ticket.

The table below provides the average fare received by the airline, the cost of the average fare, and the fuel and labor cost percentage of the average fare.

 
UAL (UAUA)
NWA
AA (AMR)
USAIR (LCC)
SWA (NYSE:LUV)
Avg one way
 fare to airline
$255
$251
$215
$212
$206
$156
$143
$124
Avg expense
per fare
$292
$252
$223
$192
$216
$182
$143
$111

Required avg fare Increase to breakeven

(P = profit)
$37.06
$1.04
$7.87
$19.78P
$10.04
$25.45
$.71
$13.58P
Average fuel
 cost/fare
57.5%
47.7%
70.0%
49.8%
49.8%
50.5%
48.8%
36.1%
Avg labor  W2 cost/fare
17.1%
16.1%
17.5%
18.7%
21.4%
19.3%
17.2%
22.7%
 
Notes: 
  • Data is for mainline operations and excludes all known regional/affiliate impact. Data may be estimated when it is not available.
  • DAL reports mostly consolidated data and as such may not be analogous to other airlines. 
  • NWA operates a fleet of 11 747 freighters which distorts its avg fuel cost/passenger. 
  • Fare to airline includes only passenger revenue kept by the airline. (Excludes taxes and security fees).
  • One way fare = passenger revenue/enplaned passengers.
  • Expense = Operating and net non operating other expenses and taxes. Does not include capital expenditures.

Source: BTS, SEC and Corporate reports as consolidated by AirlineFinancials.com.

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For a complete breakdown of quarterly data for the airlines above with interactive charts to project the 4th quarter and full year 2008 estimates, use the following web link - Airline Data Charts.