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Home » Flight tickets » IATA: More profit airlines and lower ticket prices
IATA: More profit airlines and lower ticket prices
The airline industry is heading for a record total profit of $ 39,4 billion and air ticket prices are falling by an average of seven percent this year. This is what the international trade association IATA expects, which announced the new forecast yesterday at the start of its annual meeting in Dublin.
The favorable figures are mainly due to the low fuel prices that all airlines benefit from. Total fuel bills are expected to drop nearly 30 percent to $127 billion. While kerosene consumption is increasing by just under 5 percent due to the steadily growing flight offer. Fuel accounts for less than a fifth of total costs for the first time since 2004, IATA expects. In addition, airlines themselves are also doing a lot of work to become more efficient and cheaper, for example by collaborating more intensively.
Air travelers are also paying less and less for their flights. Airline prices will fall by an average of seven percent this year, Brian Pearce, chief economist at IATA, said. The lower rates are the result of the low oil price.
I did some calculations to get some more insight into the costs of flying.
Fuel is now 20% of the total cost.
Modern airplanes use about 3 liters per 100 km per passenger.
A return ticket to Bangkok costs about 700 euros on average.
That is 19.000 kilometers.
So per person (19000 / 100) x 3 = 570 litres.
Those 570 liters then cost 20% x 700 euros = 140 euros.
That is almost 25 cents per litre.
A 159 liter barrel of crude oil now costs about 50 dollars, 45 euros, so 45 / 159 = about 28 cents per liter.
It still has to be refined and delivered, preferably with a little profit, and that is no longer possible for 25 cents, so I predict that the prices of the airline tickets will rise just as fast next year.
With 127 billion passengers, a total fuel cost of USD 3.5 billion means an average of USD 36 in fuel per flight per passenger.
A profit of 39 billion dollars means an average profit of 10 euros per flight per passenger.
An airplane seat costs roughly 1 million euros and is almost written off in 30 years.
With 120.000 flight hours in 30 years, that is about 8 euros per seat per flight hour, not counting any costs of financing and maintenance. But I also didn't factor in the discount on the list price, so that adds up nicely.
So for a return trip to Bangkok, 22 hours, or 176 euros.
What do two pilots (klm) cost per year? 2 x 365.000 = 730.000.
They make a maximum of 1000 flight hours per year = 730 per hour x 22 hours = 16.000 / 300 passengers = 53 euros per passenger for a return ticket to Bangkok.
For the rest of the crew together also only charge 53 euros.
Who finishes the sums further?
I won't finish it because the premise is already wrong. For example, there are also a significant number of business/first class passengers on the plane who pay at least three times as much. You also did not count the freight that goes with you.
$10 per passenger profit? That is VERY much.
It's more like around $4. When I buy a ticket they are usually around €500.
So if they make that $505 I'll buy the ticket too, it's $4 AVERAGE. That means the $2000 tickets have to make up for the losses of the $99 tickets.
There are some snags to that calculation.
The kerosene price fluctuates.
The fuel costs can therefore never always amount to 20% of the costs.
When the price of oil plummeted, that percentage undoubtedly fell considerably
Moreover, you also need to know the definition of total cost.
Is that just the flight costs, or does that include things like offices, administration, insurance and taxes.
Furthermore, the ticket price is not the same as costs.
I would like to see the entire town. Frans's calculations are a nice start, but as he writes, not finished for a long time. What would that food and drink be in terms of purchase price? Some meals are not worth more than 3 euros. When I look at the total of charges such as security checks, isolation charges, landing fees and the rest, there is not much left. It seems to me even more fun to see how it is possible that British Airways, Lufthansa, Delta are writing good profit figures and Air France and Air Berlin are having such a hard time in the same market.
https://www.youtube.com/watch?v=6Oe8T3AvydU
Here it is explained in a nice clip
I'm going to look into it again and of course, a business class ticket is more expensive, but so is the seat, 1.5 x as long and 1.5 x as wide is already 2.25 times the surface.
And the article also states that fuel costs have only been below 2004% since 20. Probably more next year.
I don't really know if there is a lot of cargo in a normal aircraft.
And yes, you have to include everything, including ground handling, right down to advertising.
In a hospital, food is about 1% of the costs of lying down, say 6 euros, which will not be much more in an airplane.
What would an airline actually insure against?
Nor is it intended to find a formula that applies forever and ever, but some insight never hurts.
Yes, there is always a lot of freight with it Frans. I'm always at the gate at least an hour before departure and I'm always amazed at what cargo is loaded into, say, a 777. Our luggage is only a fraction of it.
What would an airline insure against? I can think of a few things. For example, compensation of families in case of a crash.
Furthermore, I don't know if you can just say Delta makes a profit, but AF KLM, for example, does not. A gigantic amount of creative accounting takes place at the multinationals. Some companies raise capital through bonds, but the reckoning will come in a few years. Some companies are currently buying back their own shares with borrowed money to boost their earnings per share, but in a few years the reckoning will come.
Furthermore, many airlines also hedge their kerosene costs (although I believe KLM does not) and that pays off when prices are high, but costs money when they are low. You should not confuse kerosene with the price of oil.
Kerosene is a refining product of oil, but that does not mean that the price of kerosene is 1:1 dependent on oil. For example, if there is a shortage of petrol and a surplus of kerosene, the price of kerosene will fall and that of petrol will rise.
You'd have to dig deep into the books to say anything sensible about it.