Aircraft Costing
Airline Operating Costs
By Peter Horder, Senior Vice President SH&E Ltd
Prepared for:
MANAGING AIRCRAFT MAINTENANCE COSTS Conference
Brussels, 22 January 2003
Agenda
Introduction Current Airline Environment Airline Cost Elements Indirect and Direct Operating Costs Overhead Cost Control Balance Sheet Effects Reference Sources Conclusions
1
Introduction
Current airline environment Safety considerations and costs
– Security restrictions – Insurance implications
Cost reduction versus revenue increases
2
Airline Economic Affects from 11 September
SCHEDULED CARRIERS ! Frequency ! Routes ! Traffic ! Revenues " Fares ? ! Profitability
Low Cost Carriers ! Fares " Traffic " Revenues " Profitability
Low Cost Carriers have been clear winners since 2001
3
Airline Safety and Security
Safety is paramount
– – – Flight procedures Maintenance procedures Ground Operations
Security Impacts
– – – Cockpit security On board security Ground delays
– Increased searches – Baggage X-ray
Security costs
– Airport charges – Increased passenger charges
4
Operating Cost Comparisons Per ASK
Britannia Air 2000 Monarch
BY DP ZB TG QF BA EK FD LX OK EW LG LO VB NI
(EUR)
Operating Cost Per ASK
0.200 0.175 0.150 0.125
COE FD LX VB NI EW U2 OK TV FR LO GO TG QF BA
Thai Airways Qantas British Airways Emirates CityFlyer Express Crossair Czech Eurowings Luxair LOT Maersk Air Portugalia
0.100 0.075 0.050 0.025 0.000 0
EasyJet Go Ryanair EK BY DP ZB
U2 GO FR
500
1,000
1,500
2,000
2,500
3,000
Source SH&E, AEA, IATA, Form 41
5
Average Stage Length (Km)
Total Operating Costs
Admin & Other 12% Ticketing, Sales & Promotion 14% Flight Ops 28%
Passenger services 11% Depreciation 6% En-Route/Airport 18%
Source (ICAO 2001 World Average)
6
Maintenance 11%
Some ICAO and F41 Cost Breakdown Percentages
100 80 60 40 20 0
In di a
en ta l
B ra at he ns
ea s
on tin
Ai r
By Peter Horder, Senior Vice President SH&E Ltd
Prepared for:
MANAGING AIRCRAFT MAINTENANCE COSTS Conference
Brussels, 22 January 2003
Agenda
Introduction Current Airline Environment Airline Cost Elements Indirect and Direct Operating Costs Overhead Cost Control Balance Sheet Effects Reference Sources Conclusions
1
Introduction
Current airline environment Safety considerations and costs
– Security restrictions – Insurance implications
Cost reduction versus revenue increases
2
Airline Economic Affects from 11 September
SCHEDULED CARRIERS ! Frequency ! Routes ! Traffic ! Revenues " Fares ? ! Profitability
Low Cost Carriers ! Fares " Traffic " Revenues " Profitability
Low Cost Carriers have been clear winners since 2001
3
Airline Safety and Security
Safety is paramount
– – – Flight procedures Maintenance procedures Ground Operations
Security Impacts
– – – Cockpit security On board security Ground delays
– Increased searches – Baggage X-ray
Security costs
– Airport charges – Increased passenger charges
4
Operating Cost Comparisons Per ASK
Britannia Air 2000 Monarch
BY DP ZB TG QF BA EK FD LX OK EW LG LO VB NI
(EUR)
Operating Cost Per ASK
0.200 0.175 0.150 0.125
COE FD LX VB NI EW U2 OK TV FR LO GO TG QF BA
Thai Airways Qantas British Airways Emirates CityFlyer Express Crossair Czech Eurowings Luxair LOT Maersk Air Portugalia
0.100 0.075 0.050 0.025 0.000 0
EasyJet Go Ryanair EK BY DP ZB
U2 GO FR
500
1,000
1,500
2,000
2,500
3,000
Source SH&E, AEA, IATA, Form 41
5
Average Stage Length (Km)
Total Operating Costs
Admin & Other 12% Ticketing, Sales & Promotion 14% Flight Ops 28%
Passenger services 11% Depreciation 6% En-Route/Airport 18%
Source (ICAO 2001 World Average)
6
Maintenance 11%
Some ICAO and F41 Cost Breakdown Percentages
100 80 60 40 20 0
In di a
en ta l
B ra at he ns
ea s
on tin
Ai r