Last week, I shared a bit about the taxes and fees included in your domestic airline ticket. In that post, I mentioned that the base fare is the largest cost of your ticket price and includes everything to get you from Point A to Point B. Today, let’s take a look at what the base fare pays for. Unlike with taxes and fees, the base fare covers the same general items whether you fly domestically or internationally.
A few years ago, I traveled aboard a major European carrier from New York to Istanbul, a nearly 12-hour flight aboard a Boeing 777-300 aircraft with just over 300 seats. I was impressed with the comfort level of the seats, the quality of food, the impressive service and generous selection of entertainment options on my own personal television in my economy seat. I was also impressed these amenities came despite a relatively inexpensive ticket for such a long flight.
That ticket cost and the on-board amenities reflect the balance that airlines must keep between maintaining profitability and attracting customers. Whether you travel abroad like I did, or take a small regional jet to a nearby city, the airlines incur numerous expenses. Below are a few of the major expenses airlines have on just about any flight.
- Aircraft. Beyond paying for the aircraft, airlines must consider the costs of training pilots and maintenance expenses.
- Fuel. Comprising 40 percent of total costs, this is the most unpredictable of all expenses and a hard one for airlines to plan for. Sometimes, airlines add a fuel surcharge to help offset this expense.
- Salaries. From experienced pilots to the social media person at headquarters, airlines employ thousands of people to handle daily operations.
- Rent and other expenses. Airlines pay rent to airports, fees to land their aircraft, air traffic control costs and more. These are the not-so-obvious expenses.
So how profitable are the airlines these days? Many times, the profit for a flight equals less than the ticket paid by just one passenger aboard a 100-seat aircraft. It’s no surprise therefore, that airlines have pulled the free meals and headphones! But don’t forget, most airlines are still multi-billion dollar corporations.
Speaking of ticket costs, have you ever wondered why the fare you look up today could be dramatically different in cost tomorrow? To maximize their profit, airlines use technology and analysts to constantly monitor demand for specific flights and times. They may also hold back some tickets to try to sell seats at a higher fare, releasing them for purchase as demand wanes. They can even tell who looks up a route, but doesn’t purchase it and can adjust fares accordingly to get a “bite.”
Is there something you want to know about the airline industry? Tell me below and you may see it in a future blog post.