Rising costs puts pressure on airline profits

The Air Transport Association of America has released its quarterly Airline Cost Index, now incorporating data through the second quarter of 2007.The composite cost index rose to 185.7, up 5.6 percent from the second quarter of 2006, compared to a 2.4 percent increase in the Consumer Price Index. The three largest cost components were fuel (25.4 percent), labor (23.6 percent) and transport-related expenses* (13.7 percent). Other year-over-year highlights include:

  * The average price paid for fuel increased 2.2 percent to $2.02 per gallon
  * The average cost of employing a full-time equivalent worker fell $1,479 to $73,292
  * Overall unit operating cost per available seat mile fell 1.1 percent to 12.46 cents
  * The average break-even load factor (BELF) dropped 0.3 points to 76.4 percent
  * Airlines experienced a 21.1 percent jump in maintenance material costs, offset in part by a 28.7 percent decline in aircraft insurance costs and a 16.5 percent decline for other insurance costs


“Soaring fuel prices, among other pressures, leave little room for error in maintaining today’s modest profit margins,” said ATA Chief Economist John Heimlich. “With the cost of running an airline up 86 percent since 2000, the industry remains laser-focused on improving efficiency and finding additional sources of revenue.”



The ATA Airline Cost Index is the only industry analysis of its kind, tracking quarterly and annual trends in the cost of inputs to airline production for U.S. passenger carriers that report quarterly financial information to the Department of Transportation. The index facilitates comparisons between the components themselves as well as broader economic indicators.