Recently, I watched a short 10 minute educational video on YouTube explaining why airfare is as expensive as it is. Here is the link to it in case you want to watch it. In short, the video uses an example of an Airbus A320 fully loaded from New York’s John F. Kennedy International Airport (JFK) to Washington Dulles International Airport (IAD) just south of Washington D.C. to illustrate the costs that go into a commercial flight. The video makes the conservative consumption that the aircraft is fully loaded with 154 passengers (which is rarely the case) and that each ticket for the flight costs around 80 dollars (which is what they were selling for online).
To start off, the video addresses the misconception that fuel is the biggest operating cost for airlines. It states that on this short flight, the A320 will burn 317 gallons of fuel (at $1.24 per gallon), costing a total of $393 (or around $2.55 per passenger). While it is true that fuel plays a rather small role in the operating costs of the flight, the aircraft will burn a lot more than 317 gallons of fuel during the short flight. The number 317 comes from rather faulty calculations using the direct distance between the two airports and fuel burn of the aircraft at cruise level, where it is the most efficient. It does not take into account the fact that the aircraft needs extra fuel to taxi to the runway, takeoff, climb to cruise, step-climb, and taxi to the gate once it has landed. In addition, aircraft never fly directly from one airport to another as they will need to compensate for traffic control, runway direction, and weather among others. In reality, the A320 in the example the video provided will need to carry 1690 gallons of fuel and burn at least 690 gallons assuming that all is well and none of the 1000 gallons of mandatory reserve fuel will be needed. At the same price of $1.24 per gallon, the 690 gallons of fuel burned on this flight will cost a total of $855.6, or around $5.55 per passenger again assuming that the plane is fully-loaded. In reality, this will probably amount to more than $10 per passenger as foul weather and airport congestion typically lead to greater fuel burn, and rarely are airlines able to fill up all of the seats of flight.
The video then goes on to explain the other expenses that go into each plane ticket and drive up the cost of airfare. These include:
- Crew costs – $1.50 (slightly underestimated)
- Departure airport fees – $7.00
- Arrival airport fees – $6.50
- Taxes – $15.60
- Aircraft cost (depreciation per flight) – $11.5
- Maintenance – $14
- Corporate expenses (marketing, office rent, etc.) – $10 (conservative and rough estimate)
- Insurance – $0.25
- Other costs – $1.25
All in all, the total costs of the flight add up to around $70 per passenger, meaning that theoretically $10 (or 12.5%) of the airfare price should be profit for the airline. However, the problem is that these cost estimates were very conservative on the low end, and based on the assumption that the plane is fully-loaded. In reality, the operating costs will likely be higher than what was predicted and the aircraft will probably only be 2/3 full. Therefore, it’s more than likely that the airline will in fact be losing money by operating this flight. Airlines earn less profit than you may think, and most of their profit comes from long-haul flights or hiked airfare during peak travel seasons.