bmc said:
Airline economics 101 in one or two TB posts
The costing to operate an airlines is derived from two categories: fixed costs and variable costs. Fixed costs include aircraft ownership or leasing, salaries, buildings,insurance, marketing, etc. Variable costs include fuel, catering, landing fees, atc charges.
Monthly lease costs vary from $60,000 a month for an old clapped out B727 (includes engine lease cost), to roughly $300,000/ month for an A320 or a B737, to $800-1,000 for a new B777-300. These numbers fluctuate based on demand and supply.
Whether you fly an airplane or not, you have to pay for the fixed costs. Or someone will seize the airplanes. The objective is to ensure that every time you start an airplane, you have revenue passengers or revenue cargo on board and of sufficient revenue to not only pay for the flight but to contribute to the company.
So, when I quoted $20,000 an hour, that includes fixed costs prorated across your entire fleet, and based on the number of hours each fleet type is scheduled to fly. Typically, long range airplanes have a daily utilization of 11 to 14 hours per day. Short haul is ball park 9 to 10.
Average B737 / A319 series aircraft operate for about $6,000 an hour, B767-300 for roughly $10,000 per hour. This varies from airline to airline, but I think that they are close.
A LAX to Hong Kong flight takes, on average 13 hours. I have done it in 15 hours and 50 minutes with strong headwinds, but for the sake of this discussion, lets figure on 13 hours to prove my point. Lets assume that US carriers are flying their airplanes to southern China for maintenance. If China is not on your route map, you will have to fly the airplane empty from LAX to Southern China. You can sell seats because you do not underlying route authority to carry passengers. These traffic rights are negotiated and awarded to specific airlines. So, to accept the claim that US carriers are flying their airplanes to China mean they would incur a round trip expense of USD520,000 per rotation to position the airplane, before you incur the expenses of having allegedly unqualified grease monkeys touch your airplane. Considering the frequency of maintenance required and assume you have five B747's in your fleet, you are paying out of pocket, millions to access cheap maintenance. On top of that, you are pulling an airplane out of the network to do this and it is not earning money. It does not make sense.
The above is a grossly over simplified explanation of airline economics. If you are interested in learning more, check out Cranfield in the UK or Embry Riddle in Florida and Arizona, or IATA's Air Mercury course (which I have taught and occasionally teach Air Bilateral Negotiation and network planning.
