Source: ATA Annual Report 2005

Operating Expenses of the Airline Industry, 2004

Globally, labor accounts for 35% of the operating costs of the airline industry, which represents about 75% of all non-fixed costs. Layoffs are consequently the first strategy used for rationalization during a phase of downturn. Fuel comes in second with 10-12% and commissions to travel agents account for 6% (down from 10% in 1995). With the development of e-commerce, many customers are able to buy tickets directly from the airlines or from a low cost online broker, instead of using a travel agent. To cover its costs, an airline must have on average 65% of its seats occupied (passenger load factor), a share that increased in the deregulation context. The average passenger load factor varied from 66% to 69% through the 1990s, underlining low profit margins within the industry. Another consequence of deregulation processes was the emergence, especially in the United States, of several regional airlines providing feeder services.

The above figure underlines the specificities of operating expenses. They include flight operations (fuel, pilots), maintenance (parts and labor), ground services (handling passengers, luggage and freight at terminals), promotion (advertising, reservations and travel agent commissions; 80% of all ticket sales are done through travel agents), on-board services (flight attendants, food and entertainment), administration, equipment depreciation and amortization and transport related (delivery trucks).