Airline cost per hour?
Thread Starter
Join Date: Feb 2003
Location: UK
Posts: 42
Likes: 0
Received 0 Likes
on
0 Posts
Airline cost per hour?
A thread on this forum a few weeks ago intrigued me! It was regarding lease rates for a B737 and B757. I think the examples given were £100,000 and £120,000 repectively and that on an average 200 hour month this meant an hourly rate of £500 and £600.
This sounded "cheap" to me and got me wondering what the full hourly rate would be once fuel, crew, maintenance and landing charges (based on say, 1 landing per hour at an average regional airport) would be.
This sounded "cheap" to me and got me wondering what the full hourly rate would be once fuel, crew, maintenance and landing charges (based on say, 1 landing per hour at an average regional airport) would be.
Join Date: Jan 2000
Posts: 677
Likes: 0
Received 0 Likes
on
0 Posts
You might like to look at Flying Off Course by Rigas Doganis.
Operating Costs are as much a function of the aircraft as the airline (ie their salaries, efficiencies etc).
In his book he quotes BA's costs in terms of escability. In this he shows that Aircraft Standing Charges (which would include leasing) made up 14% of the total costs. This would imply from your numbers that the total cost would be around £3500 per hour.
In his BA's figures the other costs included:
Other fixed direct operating costs:
Crew salaries and training, fixed engineering costs, passenger insurance
Indirect operating costs
station costs, ticketing and admin, depreciation of ground equipment
Variable operating costs
fuel and oil, crew expenses and subsistence, variable engineering costs, airport and navigation charges, handling and parking costs, passenger services, cargo
You can argue about which are fixed and which variable and the level of each will vary by size of airline and location.
So that should give you an idea that a genearlised operating cost is just that, but you need to take account of local condtions.
Operating Costs are as much a function of the aircraft as the airline (ie their salaries, efficiencies etc).
In his book he quotes BA's costs in terms of escability. In this he shows that Aircraft Standing Charges (which would include leasing) made up 14% of the total costs. This would imply from your numbers that the total cost would be around £3500 per hour.
In his BA's figures the other costs included:
Other fixed direct operating costs:
Crew salaries and training, fixed engineering costs, passenger insurance
Indirect operating costs
station costs, ticketing and admin, depreciation of ground equipment
Variable operating costs
fuel and oil, crew expenses and subsistence, variable engineering costs, airport and navigation charges, handling and parking costs, passenger services, cargo
You can argue about which are fixed and which variable and the level of each will vary by size of airline and location.
So that should give you an idea that a genearlised operating cost is just that, but you need to take account of local condtions.
Join Date: Dec 2002
Location: Dublin Ireland
Posts: 15
Likes: 0
Received 0 Likes
on
0 Posts
American Airlines
A friend of mine is a steward on an AA 777.
As part of his training he was told that the hourly rate for the 777 was $25,000 per hour. This is the total running costs to the company, it includes all associated costs like ground handling fuel, advertising etc etc.
That seems to be an awful lot more than your quoting, different aircraft accepted?
As part of his training he was told that the hourly rate for the 777 was $25,000 per hour. This is the total running costs to the company, it includes all associated costs like ground handling fuel, advertising etc etc.
That seems to be an awful lot more than your quoting, different aircraft accepted?
Thread Starter
Join Date: Feb 2003
Location: UK
Posts: 42
Likes: 0
Received 0 Likes
on
0 Posts
The figures quoted above continue to surprise me.
If, using the B737 example and assuming that it was an older model, say a 200 with approx 130 seats (?). Then this comes to under £30 per seat per hour (assuming each seat is full of course)
Even using the above B777 example. The same calculation comes to under $90 (£60) per seat per hour (based on 280 seats (?))
All I have to do now is find 130 passengers on a daily basis!
Brabazon.
Any idea where I could get said publication? I've done a quick search of some obvious aviation suppliers, but I've had no joy.
Thanks
If, using the B737 example and assuming that it was an older model, say a 200 with approx 130 seats (?). Then this comes to under £30 per seat per hour (assuming each seat is full of course)
Even using the above B777 example. The same calculation comes to under $90 (£60) per seat per hour (based on 280 seats (?))
All I have to do now is find 130 passengers on a daily basis!
Brabazon.
Any idea where I could get said publication? I've done a quick search of some obvious aviation suppliers, but I've had no joy.
Thanks
Last edited by Bullet Tooth Tony; 9th Apr 2003 at 05:03.
Join Date: Dec 2002
Location: Dublin Ireland
Posts: 15
Likes: 0
Received 0 Likes
on
0 Posts
BTT:
Its probably my innocense but I recently flew on an AA 777 from London to Miami for a fare of $550 RETURN. The flight is approx 7-8 hours. 7x90=$630!x2=$1260 . How does that work then?
Its probably my innocense but I recently flew on an AA 777 from London to Miami for a fare of $550 RETURN. The flight is approx 7-8 hours. 7x90=$630!x2=$1260 . How does that work then?
Thread Starter
Join Date: Feb 2003
Location: UK
Posts: 42
Likes: 0
Received 0 Likes
on
0 Posts
Dubliner.
Yeah, I see your point! I imagine that an airline that size competes because of its size. In other words it may cost $90 per hour to operate 1 B777, but it doesn't cost $180 to operate two. I would imagine that servicing, real estate and certain other costs combine to reduce the overrall cost to a large company such as AA. Having said that, AA is not a good example of how to cut costs at the moment!
I still like the look of the B737 example though.
Yeah, I see your point! I imagine that an airline that size competes because of its size. In other words it may cost $90 per hour to operate 1 B777, but it doesn't cost $180 to operate two. I would imagine that servicing, real estate and certain other costs combine to reduce the overrall cost to a large company such as AA. Having said that, AA is not a good example of how to cut costs at the moment!
I still like the look of the B737 example though.
Join Date: Dec 2002
Location: Dublin Ireland
Posts: 15
Likes: 0
Received 0 Likes
on
0 Posts
The impression I got was that $25K was the cost per hour per plane. I may well be wrong and my friend is a steward after all and not a logistics expert!
I'm sure that someone who knows better than both of us will come in and rubbish th opinions of "Experts"(Bar stool experts!") like us.
I've never met you BTT but I'm hoping your a rich old geezer who is checking put the figures of running a 737 and toying with the idea of starting up an airline. I'd just like to be the first to submit my resume as I am out of work. To steal a phrase that you will no doubt understand because of your name:"You can call me Susan if it makes you happy"
I'm sure that someone who knows better than both of us will come in and rubbish th opinions of "Experts"(Bar stool experts!") like us.
I've never met you BTT but I'm hoping your a rich old geezer who is checking put the figures of running a 737 and toying with the idea of starting up an airline. I'd just like to be the first to submit my resume as I am out of work. To steal a phrase that you will no doubt understand because of your name:"You can call me Susan if it makes you happy"
Join Date: Aug 2002
Location: sydney
Posts: 136
Likes: 0
Received 0 Likes
on
0 Posts
Oh boy!
Any cost per seat-hour is obtained by doing simple arithmetic - find a dollar cost amount, find an hourly time, find the number of seats, and divide them. Trouble is, even for the simple ones, there are many answers (eg hourly time: do you mean flight hrs, elapsed hours or block hrs? What about downtime due to scheduled maintenance? Ditto unscheduled? Average across the fleet, or just this one aircraft? etc etc)
The trick is to ask the right question! Do you want the marginal cost per incremental occupied seat? This might be the answer to a question like "what is the cost of an additional sold seat?" (and the answer would be very low). Or do you want to ask "what, with my proposed schedule/routes/load factor/aircraft type/etc will be my cost per available seat?"
The lease rates are about right as quoted (depends on aircraft age, of course). A typical wet-lease/ACMI contracted rate might be around $2500 or so for a 737-300 going say 250 hrs/mth (shows why BA loses money). And that doesn't include such items as fuel, airport/route charges etc, pax/bags/mail/cargo insurance, sales/marketing, check-in, ground handling, etc etc - you get the drift. BTW, a 1-hour average sector for a 757 doesn't work too well, probably engine costs will go through the roof.
If you added all AA's overhead etc on, you may well get up to the $25k (sounds too high...). And the reason, Dubliner, that pax times leisure fare does not compute is that there were a few pax(maybe very few now) who paid much more than leisure fare... the magic of yield management.
Any cost per seat-hour is obtained by doing simple arithmetic - find a dollar cost amount, find an hourly time, find the number of seats, and divide them. Trouble is, even for the simple ones, there are many answers (eg hourly time: do you mean flight hrs, elapsed hours or block hrs? What about downtime due to scheduled maintenance? Ditto unscheduled? Average across the fleet, or just this one aircraft? etc etc)
The trick is to ask the right question! Do you want the marginal cost per incremental occupied seat? This might be the answer to a question like "what is the cost of an additional sold seat?" (and the answer would be very low). Or do you want to ask "what, with my proposed schedule/routes/load factor/aircraft type/etc will be my cost per available seat?"
The lease rates are about right as quoted (depends on aircraft age, of course). A typical wet-lease/ACMI contracted rate might be around $2500 or so for a 737-300 going say 250 hrs/mth (shows why BA loses money). And that doesn't include such items as fuel, airport/route charges etc, pax/bags/mail/cargo insurance, sales/marketing, check-in, ground handling, etc etc - you get the drift. BTW, a 1-hour average sector for a 757 doesn't work too well, probably engine costs will go through the roof.
If you added all AA's overhead etc on, you may well get up to the $25k (sounds too high...). And the reason, Dubliner, that pax times leisure fare does not compute is that there were a few pax(maybe very few now) who paid much more than leisure fare... the magic of yield management.
Thread Starter
Join Date: Feb 2003
Location: UK
Posts: 42
Likes: 0
Received 0 Likes
on
0 Posts
Paddy
No, unfortunately I'm not a rich businessman looking to start a new airline, but if I was and you let me call you Susan.........you never know!
Groaner
Thanks for the points. As I said above, I'm not looking for a figure down to the last penny, it was just curiosity that stemmed from a previous thread on this forum. I understand that finding the elusive passengers to fill every seat is the key, but still, the figures quoted were surprisingly low. Even more so with cumulusse's figures of $90K USD per month.
No, unfortunately I'm not a rich businessman looking to start a new airline, but if I was and you let me call you Susan.........you never know!
Groaner
Thanks for the points. As I said above, I'm not looking for a figure down to the last penny, it was just curiosity that stemmed from a previous thread on this forum. I understand that finding the elusive passengers to fill every seat is the key, but still, the figures quoted were surprisingly low. Even more so with cumulusse's figures of $90K USD per month.
Join Date: Apr 2002
Location: over here
Posts: 472
Likes: 0
Received 0 Likes
on
0 Posts
Just out of interest, 'Air Transport World' is quoting average costs amongst the US majors in 'per seat mile' at 9.20 cents. (last quarter 2002)
Revenue was 8.65 cents per seat mile - a very gloomy picture indeed.
Revenue was 8.65 cents per seat mile - a very gloomy picture indeed.
Join Date: Sep 2002
Location: Middlesesx
Posts: 2,075
Likes: 0
Received 0 Likes
on
0 Posts
ASK
Actual Seat Cost per Kilometer (ASK) for what is it worth Easy are about 5.0 pence ASK BA is 13.0 pence out of LGW and 15.0 pence out of LHR. These figures quoted about 4 weeks ago but with all that has happened I would imagine that both outfits would be pressed to achieve this today.
Join Date: Jan 2001
Location: He's on the limb to nowhere
Posts: 1,981
Likes: 0
Received 0 Likes
on
0 Posts
There is an outfit round here offering training for 737 Type Ratings. The price for Joe Public to hire the actual 737 to take the test in is US$59 per minute - around $3500 per hour. You can then use this figure as a start point, make all sorts of assumptions, and come out with another figure which you can use to prove anything 
Moderator
Join Date: May 1998
Location: .
Posts: 250
Likes: 0
Received 0 Likes
on
0 Posts
Just at the moment one could expect the monthly lease on B737’s ( with 148 seats ) to be in these ranges:
737-300 = $135,000 to $180,000
737-700 = $190,000 to $270,000
That said, –700’s are hard to get hold of (hence why it can command a higher monthly rate).
Of course on top of the basic lease costs, you also got the following to consider as well:
Hull & engine insurance
Fuel charges
Aircraft & engine maintenance reserve payments
Contingency funds
Navigation & EuroControl charges
Airport approach, landing, handling, and parking charges
Pax taxes ( indirectly )
Crew training costs
Staff salaries
Office rentals
IT/Systems
Company vehicles
Etc, etc, etc.......
Now if you lump the whole lot together, I believe that you’d find that the ball-park figure for operating a B737 ( for a typical UK charter / low cost airline – with an aircraft operating, say, 4000’ish hours per year ) is something in the range of £60 to £100 per MINUTE !
..... and somehow you’ve got to make a profit within that lot too !
737-300 = $135,000 to $180,000
737-700 = $190,000 to $270,000
That said, –700’s are hard to get hold of (hence why it can command a higher monthly rate).
Of course on top of the basic lease costs, you also got the following to consider as well:
Hull & engine insurance
Fuel charges
Aircraft & engine maintenance reserve payments
Contingency funds
Navigation & EuroControl charges
Airport approach, landing, handling, and parking charges
Pax taxes ( indirectly )
Crew training costs
Staff salaries
Office rentals
IT/Systems
Company vehicles
Etc, etc, etc.......
Now if you lump the whole lot together, I believe that you’d find that the ball-park figure for operating a B737 ( for a typical UK charter / low cost airline – with an aircraft operating, say, 4000’ish hours per year ) is something in the range of £60 to £100 per MINUTE !
..... and somehow you’ve got to make a profit within that lot too !
Before "Ze Germans" get here
Join Date: Apr 2003
Location: ?
Posts: 319
Likes: 0
Received 0 Likes
on
0 Posts
Late departure costs
Imagine what late departure costs..
I've been told that you get fined pretty hard if you depart the gate late, about 500GBP per minute in the bigger airports. Imagine what that does to profit margins
I've been told that you get fined pretty hard if you depart the gate late, about 500GBP per minute in the bigger airports. Imagine what that does to profit margins
