Question 1

What are 'direct operating costs'?

Accepted Answer

These are costs directly tied to the operation of a specific flight. If the flight doesn't happen, these costs are not incurred. They include fuel, flight and cabin crew salaries for that flight, landing fees, and flight-specific maintenance. Costs like marketing or the CEO's salary are 'indirect' and not included here.

Question 2

Why isn't aircraft ownership (lease/depreciation) included in direct costs?

Accepted Answer

Aircraft ownership costs are typically considered 'indirect' or 'system' costs because the airline pays them whether the plane is flying or sitting on the ground. Route profitability analysis focuses on the marginal contribution of a specific route to covering those system-wide costs.

Question 3

How can a route with a negative profit still be valuable?

Accepted Answer

A route might be kept for strategic reasons. It could be a 'feeder' route that brings passengers from a smaller city to a major hub, where they connect to highly profitable long-haul flights. The small loss on the feeder route is acceptable if it enables much larger profits elsewhere in the network.

Question 4

What is the 'load factor' and how does it impact profitability?

Accepted Answer

Load factor is the percentage of seats sold on a flight. It's a primary driver of ticket revenue. A small increase in load factor can have a huge impact on profitability because the direct costs of the flight (fuel, crew) are largely the same whether the plane is 70% full or 90% full. The revenue from those extra seats goes almost entirely to the bottom line.

Question 5

How does competition affect a route's profitability?

Accepted Answer

Heavy competition on a route typically drives down ticket prices, which directly impacts ticket revenue and profit margins. Airlines on competitive routes must focus heavily on cost control, ancillary revenue, and service differentiation to maintain profitability.

Route Profitability Analyzer

Route Revenue

Direct Operating Costs

Results

Understanding Route Profitability

Frequently Asked Questions

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