Mon, Jan 10, 2011
Airlines Saw Costs Rise Five Percent Compared To 2009
The Air Transport Association of America (ATA) has released its
quarterly Airline Cost Index, incorporating data through the third
quarter of 2010. Costs faced by U.S. passenger airlines, measured
by the “composite cost index,” rose 5 percent to 209.8
in the third quarter of 2010 compared to the same period of 2009,
outpacing the 1.2 percent gain in the U.S. Consumer Price Index
(CPI). The composite airline cost index remains approximately 110
percent higher than its level of 100 in 2000.
The three largest components of the index – which includes
all operating expenses, as well as interest expense – were
fuel, labor and transport-related expense, respectively. Other
third quarter highlights released Thursday include:
- Improvements in fuel efficiency, labor productivity and revenue
generation helped offset the higher composite costs, pushing the
break-even load factor down 8.7 percentage points to 75.9 percent
– the lowest level since the first quarter of 2001 –
and enabling the first consecutive quarters of profitability since
the middle of 2007.
- Combined fuel and labor costs accounted for half of airline
operating expenses. The average price paid for fuel rose 10.6
percent, from $1.92 to $2.13 per gallon. The average cost (wages,
benefits and payroll taxes) of a full-time equivalent worker rose
5.6 percent to a high of $86,603.
- Other rising cost categories included, among others,
advertising and promotion (up 12.8 percent), aircraft rents and
ownership (up 9.4 percent), travel agency commissions (up 6.1
percent), landing fees (up 3.8 percent) and interest (up 3.6
percent).
- Other categories seeing year-over-year declines in input costs
included maintenance material (cost of maintaining and purchasing
materials for airframes, aircraft engines, ground property and
equipment, down 6.7 percent), property rents and ownership (down
5.1 percent) and non-aircraft insurance (down 3.8 percent).
- Categories with year-over-year changes of less than 3 percent
were aircraft insurance, communication, food and beverage,
professional services, transport-related expenses* and utilities
and office supplies.
"The third-quarter results highlight the continued importance of
offsetting the rising costs of doing business through operational
efficiencies, productivity gains, and diversification of revenue
streams. Thanks to a strengthening economy and the continuing
efforts of airlines to adapt to a volatile environment, the
increase in costs did not stand in the way of profitability this
quarter,” said ATA Chief Economist John Heimlich.
“Nonetheless, with costs likely to continue rising in this
period of economic uncertainty, financial discipline remains
paramount.”
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