More on airline costs…
Long ago (1980’s) legacy airlines had a break-even load factor of around 74%. Fuel was always about 33% of the operating costs. Fuel was cheap, but sales overheads were expensive. That included commissions, advertising, ground staff etc. Ownership costs (or lease expenses) were high due to eye-watering interest rates. The industry standard was just around 100 employees per narrow body. (160 per widebody)
What has changed? The LCC model reduced direct wages, employment contracts got diluted, employee numbers per aeroplane were reduced. Wages fell. Costs of sales plummeted due to reducing company sales staff, the internet and general bastardry. Executive remuneration soared. Fuel went crazy, on average over the last 10 years. Aeroplanes are more expensive but money is cheaper. Airport fees run just above inflation. frequent flyer schemes actually make money now due to wholesale stupidity.
Sales costs used to run about 16% of revenue. Today what would it be? 2 or 3%?
Fuel used to be 30% +/-. Today? Unhedged I imagine its over 40% for legacy carriers, more for LCCs.
Wages have only gone backwards.
ICAO figures suggest that advertising used to be about 2% of revenue. Today advertising budgets are replaced by headline grabbing low fares. Which aren’t cheap when you do the math.
Leasing costs today are based on very low interest rates, but still have minimum use clauses. I expect that most leases charge for 6+/ day, use or not. The 737 leases that I signed* in 1988 did.
All distilled, with a lot of scientific wild-assed guesses, I imagine that at $100 fares, the break-even is circa 68%. It might be less right now until the lease costs catch up with them. I am not seeing cheaper jet fuel for a long time, btw. Fossil energy production was already lagging demand before the invasion of the Ukraine. The EU has finalised an embargo on Russian feedstocks. Unless India and China buy the surplus oil is going up. If they do, its still staying the same.
*signing leases: if you don’t know who the patsy in the room is, it’s you.