Airline Costs - why they're so high

C

CFA123

Silver
May 29, 2004
3,512
413
83
A decade ago, fuel accounted for about 15 percent of airline operating expenses.
Five years ago, it was 29 percent.
Today, it's 35 percent.

The rest of the airlines' costs are broken down as follows
  • Salaries and benefits account for 28 percent. Ten years ago, it was the biggest expense at 39 percent. But several major airlines filed for bankruptcy and that allowed them to renegotiate labor contracts.
  • Aircraft maintenance, airport landing fees and travel agency commissions account for 18 percent.
  • Aircraft lease payments, food and drinks and in-flight entertainment account for 5 percent. And that's even with most airlines no longer serving peanuts.
  • Another 14 percent goes to miscellaneous costs, such as updating reservation systems and marketing partnerships with other airlines.

U.S. airlines burn an average of 22 gallons of fuel for every 1,000 miles each passenger flies. At $3.03 a gallon, that's about $100 in fuel for a roundtrip flight from Miami to DR, about $200 in fuel per passenger roundtrip NYC.

Despite the rising fares and fees, demand for air travel is rising. The airlines expect 206 million passengers this summer, a 1.5 percent increase from last year.

source: Airline fuel bills today are anything but peanuts - Yahoo! Finance
 
beeza

beeza

Silver
Nov 2, 2006
3,480
732
113
That's if you buy your fuel with your hedged supplier. If you buy your fuel in the DR you still have to pay duty on it. JetA1 is now around $6 a gallon, the most expensive in the Caribbean. There is no "snatch back" on fuel duty either. i.e. you can't claim the tax back.

Many airlines now tanker round-trip fuel with them so that they don't have to refuel here. But that costs a lot of money, especially for the trans-atlantic carriers.

If only the Dominican government could see that if they reduced the duty on jet fuel, then the airlines would actually buy more of it therefore increasing their revenues. But they are too short sighted to see this.
 
R

rendul

Bronze
Feb 24, 2002
623
11
18
rendul.tripod.com
Hey Buster!! I booked with Westjet for my flight in June and because I can split the dates to whatever I like and not like other charter airlines that will give a maximum of 2 weeks. I am flying back August 5 so it is a lot cheaper than Air Canada.
 
cobraboy

cobraboy

Pro-Bono Demolition Hobbyist
Jul 24, 2004
40,964
936
113
RacerX said:
And dont forget the $135 airline tax imposed by the DR government.
Click to expand...
Folks mock me when I pronounce one of CB's Law of Rhetorical Economics:

The more you tax something, the less of it you'll get...
Click to expand...

What the DR gubmint ought to do is bring that tax to ~$0~, raise the entry fee to $20, offer coupons for businesses in select "tourist zones" and then impose a modest 5% tax in those designated "tourist zones."

I'll bet the net taxation take is the same, and folks *think* they're getting a cheap dealio in Paradise: "cheap airfares to the Dominican Republic."
 
M

mountainannie

Platinum
Dec 11, 2003
16,350
1,358
113
elizabetheames.blogspot.com
R

RacerX

Banned
Nov 22, 2009
3,390
376
0
cobraboy said:
Folks mock me when I pronounce one of CB's Law of Rhetorical Economics:



What the DR gubmint ought to do is bring that tax to ~$0~, raise the entry fee to $20, offer coupons for businesses in select "tourist zones" and then impose a modest 5% tax in those designated "tourist zones."

I'll bet the net taxation take is the same, and folks *think* they're getting a cheap dealio in Paradise: "cheap airfares to the Dominican Republic."
Click to expand...

I agree along those lines. $135 doesnt put the asses in the seats, especially with higher fuel costs. $20 entry and exit fee would generate the same revenue if the plane has more passengers on it. But it wont happen because the Tourism Board believes there own hype "Yes, this is a country of miracles." While people get cheaper airfares to Barbados and Trinidad.
 
I

IslandDreaming

Gold
May 5, 2007
9,246
92
0
CFA123 said:
A decade ago, fuel accounted for about 15 percent of airline operating expenses.
Five years ago, it was 29 percent.
Today, it's 35 percent.

The rest of the airlines' costs are broken down as follows
  • Salaries and benefits account for 28 percent. Ten years ago, it was the biggest expense at 39 percent. But several major airlines filed for bankruptcy and that allowed them to renegotiate labor contracts.
  • Aircraft maintenance, airport landing fees and travel agency commissions account for 18 percent.
  • Aircraft lease payments, food and drinks and in-flight entertainment account for 5 percent. And that's even with most airlines no longer serving peanuts.
  • Another 14 percent goes to miscellaneous costs, such as updating reservation systems and marketing partnerships with other airlines.

U.S. airlines burn an average of 22 gallons of fuel for every 1,000 miles each passenger flies. At $3.03 a gallon, that's about $100 in fuel for a roundtrip flight from Miami to DR, about $200 in fuel per passenger roundtrip NYC.

Despite the rising fares and fees, demand for air travel is rising. The airlines expect 206 million passengers this summer, a 1.5 percent increase from last year.

source: Airline fuel bills today are anything but peanuts - Yahoo! Finance
Click to expand...

Wait until they have to replace aging equipment, some who rely on 737-200's are going to get forced to replace many all at once
 
I

IslandDreaming

Gold
May 5, 2007
9,246
92
0
cobraboy said:
Folks mock me when I pronounce one of CB's Law of Rhetorical Economics:



What the DR gubmint ought to do is bring that tax to ~$0~, raise the entry fee to $20, offer coupons for businesses in select "tourist zones" and then impose a modest 5% tax in those designated "tourist zones."

I'll bet the net taxation take is the same, and folks *think* they're getting a cheap dealio in Paradise: "cheap airfares to the Dominican Republic."
Click to expand...

You nuts? That makes sense
 
R

rubio_higuey

Gold
Feb 7, 2007
8,005
625
113
Here's some reading for you frequent travellers on airline cost structure and it fare effect.
Avoid Being Ripped Off by the Airlines - ABC News
http://phx.corporate-ir.net/Externa...9NDE3Mzg3fENoaWxkSUQ9NDM5MzgwfFR5cGU9MQ==&t=1

Case study: JetBlue
current cost per ASM (available seat mile) as of Dec 31: 9.92 cents
cost per ASM adjusted for fuel 20% increase since, 10.56 cents (pp40, annual report, fuel cost as 32.3% of total cost, adjusted 20% up for fuel increases in 2011).
Average load factor 81.3% (pp. 44)
Cost per PSM/RPM (passenger seat mile/revenue passenger mile) 12.99 cents

Stage length (trip distance) for JFK-SDQ is 1550 miles

now calculate Jetblue cost for 1 passenger based on ASM, load factor and PSM/RPM: 201.34 USD

That is the average cost it costs JB to transport one flying passenger on JFK-SDQ route considering average load factor of JB on network-wide basis. Of course this is just approximation because I do not have EXACT average load factor for JFK-SDQ route (the above load factor is, again, on network-wide basis).

So let's calculate using average load factor 90% for SDQ-JFK route on annual basis (we all know JFK-SDQ route gets high load factors). The PSM/RPM cost would then be 11.73 cents, for average stage length cost of $181.87.

The calculation assumes no fuel hedging (unlikely) and fuel cost increase by 20% since the time the data used for 2010 annual report, year ending December 31, 2010.

So, now let's assume some hedging and fuel cost increase by 10%.

Then, the adjusted per ASM cost would be 10.25 cents.
cost per PSM/RPM @ 81.3% load factor:12.61 cent
JFK-SDQ trip internal cost based on PSM/RSM: $195.46
cost per PSM/RPM @ 90% load factor:11.39 cent
JFK-SDQ trip internal cost based on PSM/RSM: $176.53
 
E

edm7583

New member
May 29, 2007
388
32
0
JetBlue's CASM for Q1 2011 was 11.37

$.1137*150 (for the A320) *1549miles = $26418.20
81.4% load factor (revenue passengers) =123 paying passengers (rounded up to the nearest whole passenger)
Cost Per passenger=$214.78 each way. This is their break even fare per passenger for this route.
Often, you can get flights for less than this, when demand is lower, which is essentially a loss for the airline. (This is where 2nd bag fees, fees for nicer seats, etc. come in ). Other times you will pay at least that much. So for those of you who can't pay more than $139 or so each way, the airlines can no longer afford to have your business!

It is overly simplistic to consider CASM as a way to determine if you are being "ripped off" by the airline, though. The biggest factor is demand for a particular route relative to capacity. Take this example. AA flies from Miami to Caracas for $450 each way for a 1300 mile or so flight. AA also flies from Miami to Boston, which is almost as much distance, for $179 each way on the same day. Why the huge difference?? Essentially, both routes cost roughly the same for AA to operate. AA goes to CCS from MIA four times a day, and could probably increase that frequency to at least 6 a day and fill every plane as there is huge demand for travel to (and especially from) Venezuela. But the dictatorship is not approving any new routes or any increases in frequency for service to Venezuela from the U.S. than those that are already in place. (which is odd, considering the current regime in the U.S is ideologically akin to the regime in Venezuela, but I digress) This huge demand relative to artificially low capacity makes prices soar.

So what effects airline prices. IMO, they are (in order):
1)Demand relative to capacity
2) Fuel
3)Unions, or lack thereof
4)Maintenance costs (think AA)

For reference, AA's CASM was 13.98 in the same period. Spirit's was 9.35
 
W

wrecksum

Bronze
Sep 27, 2010
2,063
96
48
I find all the taxes and fees very confusing, which may be due to my feeble intellect or a deliberate attempt on the seller's behalf to shroud the truth. I'm going to Kansas in June from POP. There is a flight at $98 STI to NYC but it comes out at $260 odd one-way. There's a flight from NYC to OKC for about $200 which will cost me $400 odd all told. And that's before I get to Wichita, final destination!
It is a strange state of affairs when I can fly my private plane with just two aboard all the way, door-to -door almost, for cheaper than a scheduled airfare.Sure it's longer and I have to drive myself but it makes no sense to me.It's like Caribe tours bus fare to SDO being more expensive than taking my Montero.
Something's wrong somewhere.
 
R

RacerX

Banned
Nov 22, 2009
3,390
376
0
wrecksum said:
I find all the taxes and fees very confusing, which may be due to my feeble intellect or a deliberate attempt on the seller's behalf to shroud the truth. I'm going to Kansas in June from POP. There is a flight at $98 STI to NYC but it comes out at $260 odd one-way. There's a flight from NYC to OKC for about $200 which will cost me $400 odd all told. And that's before I get to Wichita, final destination!
It is a strange state of affairs when I can fly my private plane with just two aboard all the way, door-to -door almost, for cheaper than a scheduled airfare.Sure it's longer and I have to drive myself but it makes no sense to me.It's like Caribe tours bus fare to SDO being more expensive than taking my Montero.
Something's wrong somewhere.
Click to expand...

and the 16% ITBIS tax included in all tickets who originated in the DR. So what is a $98 NYC-STI trip + 135 airfare tax(DR) is the same STI-NYC with the obligatory 16% tax on that AND the $135 airfare tax. $135 is a round trip fee, $67.50 is the one way fee. Your tax on the ticket in the US is like $7 or something, right?
 
J

jrjrth

Bronze
Mar 24, 2011
782
1
0
mountainannie said:
Cancun one week from nyc flight and hotel all included starting at $485

http://from.bookit.com/package_resu... &rsrsa=&rsrsaid=["318"]&sort=price&sortd=asc

Punta Cana one week all included NYC flight and hotel starting at $725
http://from.bookit.com/package_resu... &rsrsa=&rsrsaid=["354"]&sort=price&sortd=asc

and the DR is a LOT closer to NYC than Cancun

wake up!! isn't that coffee that I smell?
Click to expand...


You are correct it is closer, however over the past year or so with all the headlines, noone wants to travel to Mexico and they have drastically dropped the cost to encourage travel to the region, however alot of hotels, and resturants in the Cancun Cozmel area have closed due to the drop in tourism to those regions. People are just to afraid to travel to Mexico....
 
R

rubio_higuey

Gold
Feb 7, 2007
8,005
625
113
I think it's time some myths be put to rest and airline taxes explained.

I don't know where some of you come with $135 airfare tax.

There are couple of things that should be stated clear:

First of all, ITBIS is paid on a fare of ticket if originated in the DR, or, for tickets originated outside of DR for the segment FROM the DR. Which means a ticket from Paris to Punta Cana and back to Paris will have ITBIS charged on Punta Cana to Paris portion, even if the ticket was bought and issued in France or other country and not in the DR.

If you buy a ticket that originates in the DR and the airline DOES NOT segment the fare (e.g. bulk fares, IT fares, most European airline fares) you pay ITBIS on the whole ticket (e.g. Santo Domingo to Paris to Santo Domingo ). In this case the ticket that originates in the DR and IS NOT SEGMENTED they will charge you ITBIS on the whole ticket.

But if you buy the ticket with the airline that SEGMENTS THE FARE (e.g. fare for segment SDQ to JFK and fare for segment JFK to SDQ) as many of the airlines do then you pay ITBIS only on the portion that is from Santo Domingo to other county but not on an inbound leg into the DR. But you have to buy the second (and any additional) segment separately from your first (outbound from DR) segment. You can do this through airline callcenters, universal airline webpages (but you have to ticket via airline office outside of the DR), or travel webpages such as Expedia.

In other words, if you go from DR to anywhere, and you check the one way fare from DR and into the DR, and the sum of one way base fares before taxes and fees is the same as the return base fare (excluding taxes and fees) it's cheaper for you to book and buy TWO separate one-way segments/tickets instead of ONE round-trip ticket. Of course, if the sum of two one way fares before taxes is more than one RT fare, you have to price both WITH taxes and fees to see which comes up cheaper. (Just try it on JetBlue to see the difference! Price RT SDQ to JFK to SDQ as one trip, and then price individual OW's SDQ to JFK and OW JFK to SDQ, sum up and see for yourself!)

Also if you buy and pay the ticket via the DR travel agent OR the airline office IN THE DR and even if such a ticket does not involve DR at all, e.g. a flight from Paris to Rome, you still do pay ITBIS. However, if you book the same ticket with the airline over international callcenter, airline website, or travel website such as Expedia you do NOT pay ITBIS even if you state your billing address is in the DR.

The charges for taxes and fees levied on a trip from Santo Domingo to Ft. Lauderdale on Spirit, and back, are listed below. As you will notice, the ITBIS will depend on the base fare. In this case, the fare was US$69 on both legs of the trip. Details of the taxes are listed below, and I also indicate whether the tax is payable to the US or DR authorities. As you can see, if we remove ITBIS, the fares are very similar for the US and the DR for each leg, and while they are about 15-20% more expensive in the DR than in the US (excluding ITBIS) the difference is $5 in one case (US to DR) and $10 in other case (DR to US).

There is no $135 or $67.50 tax anywhere. The ITBIS, of course, will vary depending on the base fare.


Santo Domingo to Ft. Lauderdale

AIRFARE $69.00

Price $24.43
Fuel $44.57

TAXES & FEES $103.64
-- DO: $62.34
-- US: $41.30

DO -Airport Infrastructure Fee $16.30
DO- Airport Authority Fees $15.00
DO- Departure Tax $20.00
DO- ITBIS $11.04
US- APHIS User Fee $5.00
US- Immigration User Fee $7.00
US- Passenger Usage Fee $13.00
US- International Departure Tax $16.30

TOTAL $172.64


Ft. Lauderdale to Santo Domingo

AIRFARE $69.00

Price $24.43
Fuel $44.57

TAXES & FEES $67.60
-- DO: $31.30
-- US: $36.30

DO- Airport Infrastructure Fee $16.30
DO- Airport Authority Fees $15.00
US- Passenger Facility Fee $4.50
US- Passenger Usage Fee $13.00
US- September 11th Security Fee $2.50
US- International Departure Tax $16.30

TOTAL $136.60
 
Last edited:
B

bri777

Bronze
Sep 11, 2010
1,008
19
38
Thanks Rubio

Now can you find me a reasonable flight
houston iah to pop
tax title and license lol
Manu
ps
any time
 
R

RacerX

Banned
Nov 22, 2009
3,390
376
0
rubio_higuey said:
I think it's time some myths be put to rest and airline taxes explained.

I don't know where some of you come with $135 airfare tax.

There are couple of things that should be stated clear:

First of all, ITBIS is paid on a fare of ticket if originated in the DR, or, for tickets originated outside of DR for the segment FROM the DR. Which means a ticket from Paris to Punta Cana and back to Paris will have ITBIS charged on Punta Cana to Paris portion, even if the ticket was bought and issued in France or other country and not in the DR.

If you buy a ticket that originates in the DR and the airline DOES NOT segment the fare (e.g. bulk fares, IT fares, most European airline fares) you pay ITBIS on the whole ticket (e.g. Santo Domingo to Paris to Santo Domingo ). In this case the ticket that originates in the DR and IS NOT SEGMENTED they will charge you ITBIS on the whole ticket.

But if you buy the ticket with the airline that SEGMENTS THE FARE (e.g. fare for segment SDQ to JFK and fare for segment JFK to SDQ) as many of the airlines do then you pay ITBIS only on the portion that is from Santo Domingo to other county but not on an inbound leg into the DR. But you have to buy the second (and any additional) segment separately from your first (outbound from DR) segment. You can do this through airline callcenters, universal airline webpages (but you have to ticket via airline office outside of the DR), or travel webpages such as Expedia.

In other words, if you go from DR to anywhere, and you check the one way fare from DR and into the DR, and the sum of one way base fares before taxes and fees is the same as the return base fare (excluding taxes and fees) it's cheaper for you to book and buy TWO separate one-way segments/tickets instead of ONE round-trip ticket. Of course, if the sum of two one way fares before taxes is more than one RT fare, you have to price both WITH taxes and fees to see which comes up cheaper. (Just try it on JetBlue to see the difference! Price RT SDQ to JFK to SDQ as one trip, and then price individual OW's SDQ to JFK and OW JFK to SDQ, sum up and see for yourself!)

Also if you buy and pay the ticket via the DR travel agent OR the airline office IN THE DR and even if such a ticket does not involve DR at all, e.g. a flight from Paris to Rome, you still do pay ITBIS. However, if you book the same ticket with the airline over international callcenter, airline website, or travel website such as Expedia you do NOT pay ITBIS even if you state your billing address is in the DR.

The charges for taxes and fees levied on a trip from Santo Domingo to Ft. Lauderdale on Spirit, and back, are listed below. As you will notice, the ITBIS will depend on the base fare. In this case, the fare was US$69 on both legs of the trip. Details of the taxes are listed below, and I also indicate whether the tax is payable to the US or DR authorities. As you can see, if we remove ITBIS, the fares are very similar for the US and the DR for each leg, and while they are about 15-20% more expensive in the DR than in the US (excluding ITBIS) the difference is $5 in one case (US to DR) and $10 in other case (DR to US).

There is no $135 or $67.50 tax anywhere. The ITBIS, of course, will vary depending on the base fare.


Santo Domingo to Ft. Lauderdale

AIRFARE $69.00

Price $24.43
Fuel $44.57

TAXES & FEES $103.64
-- DO: $62.34
-- US: $41.30

DO -Airport Infrastructure Fee $16.30
DO- Airport Authority Fees $15.00
DO- Departure Tax $20.00
DO- ITBIS $11.04
US- APHIS User Fee $5.00
US- Immigration User Fee $7.00
US- Passenger Usage Fee $13.00
US- International Departure Tax $16.30

TOTAL $172.64


Ft. Lauderdale to Santo Domingo

AIRFARE $69.00

Price $24.43
Fuel $44.57

TAXES & FEES $67.60
-- DO: $31.30
-- US: $36.30

DO- Airport Infrastructure Fee $16.30
DO- Airport Authority Fees $15.00
US- Passenger Facility Fee $4.50
US- Passenger Usage Fee $13.00
US- September 11th Security Fee $2.50
US- International Departure Tax $16.30

TOTAL $136.60
Click to expand...

Say what you want bro, go to Yahoo Travel and price up a ticket. There is $135 added to the final price. Using your own calculations there is $100 in tax imposed by DR on the ticket. That is still too much. $5 tax and like cobraboy said increase the tourist card fee AND require the passenger to submit upon exit. Why get a tourist card, walk 20 feet and turn it in? What the hell is that? If you required me to hold the card until departure then turn it in the people who lost it could simply pay a fine which would be 2x the cost of the card, $40. Not only do you get them coming and going BUT it will affect the people who overstay the 90 days or that lost their card.
 
You must log in or register to reply here.
Top Bottom