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Airline Flights Costs Analysis Report

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Updated: Dec 21st, 2021

Introduction

The analysis of costs of the provided services is generally required for the precise analysis of the components, which define the final price, and for the further analysis of the related spheres of service or production. The analysis of the airline flights will require the in-depth study of several aspects of the market, as the final price of the ticket is formed depending on the fuel price, the costs of the technical maintenance of the fleet, services of air dispatching, salaries of the piloting crew and stewards. The company, taken as an example is Virgin Blue Airlines.

Cost Identification and Analysis

The components of the airline flights costs generally depend on numerous factors. The fact is that, numerous spheres and services are included into the market of airline flights, and there is strong necessity to emphasize that various prices of the airline tickets depend not only on the distance of flight. The general components are the following:

  • Fuel ($ 5 to7 per gallon)
  • Initial price and technical maintenance of a plane ($ 27 to 34 million per unit)
  • Salaries of the technical personnel (technicians, hauler truck services)
  • Pilot’s salaries and licenses (depending on a company’s policy)
  • Stewards’ work
  • Costs of the food, served o board
  • Hangar rent and guard services
  • Take-off-landing fees
  • Dispatching and routing
  • Airport services usage (O’connor, 38)

These are the most common components of the costs. The detailed information should be regarded in order to calculate the average costs of the airline flights. The plane, taken for the analysis is Embraer 170 (70 to 108 passengers). 6 tons of fuel load (1585 gallons)

The calculations of the flight costs (considering the resource of the plane – 10000 flight hrs, and flights for maximum distance 3829 km)

min max ave
Plane price 24 000 000 32 000 000 28 000 000
Fuel 4 6 5
total fuel (gallons) 300 1 584 942
total fuel costs ($) 6 509 804 15 366 418 10 938 111
flight length (km) 1 530 3 889 2 709,5
fuel per km ($) 0,784314 1,851376 1,317845
resource hrs 10 000
crew $ per hour 230
maintenance $ per hour 140
Total crew and service costs 3 700 000
speed km/h 830
resource distance km 8 300 000
passengers 80 108 94
Plane operation costs 44 638 111
total flights 3 063,296
total passengers 287 949,8
Costs per passenger 155,0205

The food, served on board may be paid additionally. Moreover, the policies of the companies, which use Embraer jets often presuppose the low costs tickets, which means the absence of on board food serving included into the ticket price. Dispatching costs, in average are up to $ 120 per hour, nevertheless, the company may use private airports and do not enter the state airport zones, thus, these costs will be lowered.

Price Margins

These aspects presuppose mainly technical details, as different working regimes mean various fuel consumption and the different costs, as a result. Thus, flying at an optimal height and at a cruising speed would mean larger margin.

If the company owns more than one plane, the technical maintenance costs will be lowered, as more tech time service will be spent effectively. The lesser distances mean the more often flights (less fuel and more passengers), which will inevitably mean the lowering of the flight costs, and, as a total – the ticket prices. (O’connor, 127)

Considering the practice of the low cost companies, they had to refuse from on-board serving, thus, the stewardship costs were reduced. Additionally, Embraer air jet needs only 2 crew members (in comparison with Boeing, which requires 3 crew members).

Government Taxes

The Governmental Tax Program for the airline flights presuppose lowered taxes for the low cost flights, as the actual necessity of the low cost flights is explained by the decreasing of passenger traffic, caused by the financial crisis 2008. Moreover, the aircraft crash accidents distract people from flying. Thus, the taxation programs do not influence essentially the final price of the air ticket. (O’connor, 185)

Terms and Discounts

The fact is that, there are no specific terms, nevertheless, various programs presuppose various discounts for the passengers. Thus, people are offered bonus miles for using the services frequently. Additionally, the passengers are allowed to purchase tickets in advance, which is encouraged by reduced prices (the actual price may be decreased up to 20% of the whole price). The low cost model of the airline flights also presupposes the opportunity to order ticket online or over the phone, thus, the paperwork is lessened, and the final price is discounted. (Godfrey, 2)

Conclusion

Actually, the costs of the airline flights presuppose numerous factors and depend on numerous processes and tendencies in the global business market. The given analysis provides the average data on the costs and prices of the flight, nevertheless, the margins are large enough for lowering prices. Moreover, most companies have an opportunity to arrange discount programs for their consumers.

Works Cited

Godfrey, Brett. ‘Welcome Message from Brett’ Virgin Blue. 2010. Web.

O’connor, William. An Introduction to Airline Economics. Westport, CT: Praeger, 2008.

Virgin Blue Holdings Limited ‘Preliminary Final Report for the year ended 30 June 2009’, 2010. Web.

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