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

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

In my analysis of the 8 largest airlines for the recent 3^rd 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)	CAL	NWA	DAL	AA (AMR)	USAIR (LCC)	JBLU	SWA (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.

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

Comments

[Brian Kelly:]

Great data and fantastic website. Plenty of useful information.

BK

2008 Nov 05 08:17 AM

[Urbane Gori...:]

I'm thinking they could start charging for seat belts... And maybe in an emergency, they could go up and down the aisles with those little oxygen masks.. Say $10 each... Flotation cushions... In an emergency, I bet they could get a couple hundred dollars each. Suggest coin meeters on the toilets.. Make it $5 in quarters.. This way they can charge a 'change fee' if you only have bills. For that matter, why not just charge for air while you're flying..

Darn.. I'm good at this.. I should run an airline!

jegan

2008 Nov 05 01:31 PM

[User 292397:]

Perhaps you should walk everywhere Jegan. I am sure anyone who would potentially be seated to your whining would be thrilled. All but two Carriers are not covering the cost of operation. The numbers are solid. It only makes sense, the casual traveler should pay more! Those of us who travel frequently out of necessity already pay a premium, its time for the "sweatsuit" travelers to pay their dues. COMMERCIAL AVIATION INDUSTRY...please, on behalf of my fellow frequent travelers raise fares. It makes solid business sense, its how I run my business and it seems the only would yours will survive.

2008 Nov 05 10:20 PM