Source: Airlines for America.
Passenger Airlines Operating Costs, United States, 2014
Fuel is the most important operating cost of an airline
(28%), followed by labor (25%). Labor represents about 75% of all non-fixed costs
of airline operations. Layoffs
are consequently the first strategy used by the airline industry for rationalization during
a phase of downturn.
Since about two thirds of the operating expenses are fixed,
the marginal costs of taking an extra passenger are very small. This
leads to overbooking and highly discounted seats if several remain
unsold in the days before the flight as a money losing fare is
better than no fare at all. To cover its costs, an airline must have on average 65% of its
seats occupied (passenger load factor), a share that increased in
deregulation. The average passenger load factor varied from
66% to 69% through the 1990s, but by 2010 surpassed 80% because of a
better of available capacity.
Outside fuel and labor, there are a variety of other
They include the costs of owning and renting aircrafts (including
depreciation and amortization), renting terminal facilities and
gates, professional services (advertising, legal), landing fees,
maintenance as well as transport related (indirect services).
Still, airlines do not have to assume much research and development
costs since these costs are assumed by the suppliers of the
equipment that airline uses, from the planes themselves to seats and
For a transcontinental flight between New York and Los Angeles, it
costs about 12 cents per seat mile to operate a B-757, which has 188
seats. This 2,500-mile transcontinental flight must thus generate $56,400
to break even, or $300 per seat.