What it costs to put a plane in the air

WITH debate raging over the profitability of Australia’s airlines we look at the everyday operating costs of domestic and international services.

Rising cost... A Qantas Airbus A380 takes off over Melbourne.

WITH debate raging over the profitability of Australia’s airlines, what does it actually cost to put a plane in the air?

As Qantas looks to slash 5000 staff, cut routes and sell or defer orders on 50 aircraft in the face of a $252 million half-year loss, and Virgin Australia confront their own smaller deficit, a News Corp Australia analysis provides an insight into what costs they must wear everyday to operate domestic and international services.

Aside from fuel, which accounts for about a third of airline’s costs, according to the International Air Transport Association, it shows that on both international and domestic flights keeping passengers fed and watered, and the cost of airport taxes and navigation charges levied by air-traffic control, are among an airline’s biggest expenses.

Paying for aircrew, cargo and ground crew, and maintenance staff also add up.

The analysis is based on data from the Bureau of Infrastructure, Transport and Regional Economics, the International Air Transport Association and Flight Centre.

It also relies on available information from the Massachusetts Institute of Technology, Qantas and Virgin Australia.

It shows that a typical Qantas Airbus A380-800 flight from Sydney to Los Angeles in November last year saw the airline shell out $11,414 in food and drink, $12,625 in staff pay and $37,157 in airport taxes and navigation services to put the 484 seat aircraft into the air for the 14 hour journey.

Head... CEO of Qantas Alan Joyce at a business lunch in Sydney.

An Airbus A380-800’s tanks can accommodate 320,000 litres of fuel, which at the current refinery price of 77c a litre entails a fuel bill touching at least one-quarter of a million dollars.

In return it charged passengers an average $13,129 for one of its 14 first-class suites, $10,425 to travel in business, $2975 in premium economy and $1599 in cattle class.

This earned the airline an average $1.215 million in revenue, based on filling 78 per cent of seats.

The Flying Kangaroo’s archrival, Virgin Australia, reveals a similar story.

In the same period, its own Sydney to Los Angeles flights — operated by Boeing 777-300ER aircraft — cost it $9652 in food and drink, $9653 in staff pay, $31,117 in airport taxes and navigation services, and over $140,000 in fuel to fly the 361 seat plane.

In return, it commanded $7351 for a seat in business class, $2283 in premium economy and $1479 in economy, making $591,000 in revenue based on filling 77 per cent of seats.

This analysis can only provide a snapshot, such is the difficulty in obtaining accurate data on costs in the byzantine world of aviation.

According to analysts, an airline’s costs are typically equivalent to about 95 per cent of its revenue.

It does not factor in the costs of purchasing planes, aircraft leases and interest repayments into the money spent on operating a route.

It also does not provide a comprehensive picture of other key factors, such as aviation fuel, which many airlines buy in advance to ‘hedge” against future price rises.

On less profitable routes, costs are higher and fares are often lower.

For example, on Qantas’ Sydney-Hobart services, also in November, the airline charged an average $246 per seat to fill 146 seats in the 168 seat plane — equating to just $35,933 in revenue.

However, the airline had to shell out $3840 in food and drink, $10,830 in staff pay and $5976 in airport taxes and navigation services, in addition to fuel.

Qantas is moving ahead with plans to cut $2 billion in costs over the next three years.

Virgin Australia in November announced its intention to raise $350 million underwritten by major shareholders, Air New Zealand, Singapore Airlines and Etihad in order to access new funds.

This analysis does not explain why it has been necessary to take these measures.

What it does show, at the most basic level, however, is the complexity and range of costs an airline must bear — a key reason why there is so much uncertainty about the true state of Australia’s airlines.