This Is Where Every Dollar of Your Airfare Goes
Do you know where your airfare dollars go?
Airlines barely make enough from flying us around to pay for an order of avocado toast.
The International Air Transport Association reports that, on average, airlines around the world are expected to earn a mere $7.69 in profit per passenger carried in 2017.
U.S. airlines will do better than others around the world, earning $16.32 in profits per passenger, but that’s still barely enough to buy lunch at the airport.
But say that you buy a ticket for $116.32, and the airline pockets $16.32 in profit, where does the $100 go?
Airlines for America gives us a full breakdown of airline operating costs, based on U.S. Department of Transportation figures. While costs are distributed differently from ticket to ticket, this breakdown can help us see just where all the money we pay to airlines goes.
Say that we consider the total of U.S. airlines’ operating costs as that $100 left on a ticket. Then, about $33 went to pay for labor in the last quarter of 2016. That includes all full-time airline employees, not just pilots and flight crew.
Another $15.30 paid for the fuel that gets you there. $7.30 paid for the planes, both leased and owned aircraft. $4.40 pays for rents and maintenance of non-aircraft assets, which includes airline hangars and offices.
$8.60 went to professional services, including the lawyers, accountants, PR firms, and consultants airlines need to keep operations under control.
$1.70 pays for any food or beverage you might get onboard, from those tiny pretzels to a Diet Coke. That’s spread out over the whole airline operation, so airlines do spend more on business and first class meals.
Airlines also have to pay $1.90 just to land at airports, which includes the fees airlines pay for runway and airport maintenance. Airlines also spend $1.70 of the ticket for maintenance materials during “block time” hours. Basically, that’s the time planes spend between “blocks” on the wheels, at the gate, and taxiing.
Airlines spend 20 cents of that $100 on insurance, 80 cents on commissions to travel agents, 70 cents for communications, 90 cents for advertising and promotions, and 70 cents to keep the lights on and pencils sharpened.
Airlines also pay $12 for “Transport-Related Expenses” which is a mix of all of the non-flight related costs, including what they pay to each other for connections and code-shares. This also covers the cost of running a gift shop or selling liquor onboard.
Employee expenses (beyond salaries) cost airlines $2.00 of that $100 in operating costs. That includes employee travel expenses and membership fees to professional organizations.
The remaining $8.60 goes to “Other” which covers equipment not directly used to operate flights, losses not covered by insurance, travel interruptions, losses from non-payments or fraudulent payments, plus customs and duty fees.
Related: How to Get $69 Flights to Europe
According to the U.S. Bureau of Transport Statistics, U.S. airlines had just over $36 billion in operating expenses during the first quarter of this year.
They earned about $39.7 billion in operating revenue, of which $29 billion came from airfares, $1 billion came from baggage fees, and $724 million came from reservation change fees. The rest of the money comes from the fees airlines charge each other, plus the sale of frequent flier miles to the banks which issue mileage-earning credit cards, earnings from the carriage of cargo in the belly of the plane, and other miscellaneous earnings.
So U.S. airlines are making money. But when you compare the earnings of all U.S. airlines to the $49-$52 billion Apple expects to make in the fourth quarter of 2017 — of which only $6.7 to $6.8 billion will go to operating expenses — it’s clear that selling that iPad you fly with is a much better business than operating the plane.