What costs dominate an airliner’s operation? Part 2

Discussion
What are the dominant costs for a Legacy carrier?

Last week we defined our study approach. We would divide the analysis into two different airline types operating in three different geographies:

  • The main costs structure differences between airline types are between Legacy, full services carriers and LCCs (Low-Cost Carriers).
  • The geography where the carrier operates influences several costs factors. The main ones differing between geographies are Crew costs and Landing, Handling and Navigation fees. To analyze these, we operate the airline types in the US, Europe and Asia.

We now analyze the relative sizes of the different costs for a typical Legacy airline operating in the different geographies.

The airlines we analyze are major brand carriers in the respective market with mature cost structures.

We compare for each market a typical Narrowbody and Widebody cost structure. The Narrowbody is of the Boeing 737 MAX 10 or Airbus A321neo type and the Widebody an Airbus A330-900 or Boeing 787-9 variant.

Narrowbody costs

The typical costs for when a Narrowbody aircraft type fly its average 800nm route are shown in Figure 1.

Figure 1. Typical costs for a Legacy carrier operating a Narrowbody on its typical mission in the US, West Europe and Asia. Source: Leeham Corp.

The fuel costs are the same between the geographies, calculated with a fuel price of $2.50 per US Gallon. Fuel costs are low as we analyze the latest aircraft with upgraded engines.

The most noteworthy difference is the higher Navigation fees for West Europe. The US have no navigation fees for Domestic traffic and the Asian fees are about 20% of the West European fees charged by Eurocontrol.

Landing and Handling fees between the major airports for the different geographies are not too different, with the per passenger facility and security fees dominating.

For a mature Legacy carrier, the US has the highest crew costs, mainly caused by higher Flight Crew costs.

Maintenance and Capital costs are similar between the geographies, as Maintenance and Airliner sales/financing are global activities.

Widebody costs

The costs for a typical Widebody operation is shown in Figure 2.

Figure 2. Typical costs for a Legacy carrier operating a Widebody on its typical mission in the US, West Europe and Asia. Source: Leeham Corp.

The fuel costs are now a more dominant part of the cost structure, representing about 33-38% of total costs.

Once again, the largest differences are the Navigation fees. The US carrier is predominately flying its Widebodies intra-US, therefore paying no navigation fees for such flights. The Asian fees are once again about 20% of the European fees charged by Eurocontrol.

Landing and Handling fees between the major airports for the different geographies are similar also for Widebodies.

Crew costs are now a larger part of the costs with about 11% to 17% dependent on geography. The US has the highest crew costs.

Maintenance and capital costs are once again similar between the geographies with capital costs now being over 25% of the operational cost structure.

Next step

In the next article, we will paint the picture of LCC carrier operating costs in the three geographies.

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