How Big Airlines Stack Against Each Other In Cost & Efficiency

by Trefis Team
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The big airline companies in the U.S. may seem very similar, but they appear to operate very differently as we drill down on their costs. This note brings you our interactive dashboard that combines our in-house data analysis with our proprietary technology to give you the flexibility to understand how flight operating cost and its different components vary with flight length, aircraft sizes, and average jet fuel price, and how they compare across United Airlines (NYSE:UAL), Southwest Airlines (NYSE:LUV), American Airlines (NYSE:AAL), and Delta (NYSE:DAL).

The Major Airlines Operate Flights In A Very Different Manner

Except for Southwest Airlines, the big U.S. airline companies produce roughly between 225-245 billion seat miles annually. Seat miles, or available seat miles, is a measure of the quantity of service produced by an airline, and is a product of seats flown and distance flown. It is interesting to note that despite similar service production, the airline companies differ vastly in how they produce it. For instance, United Airlines operates nearly 32% fewer mainline flights than Delta, but uses bigger planes and longer routes, thus producing a similar amount of available seat miles.

Workforce Remains The Biggest Cost Component

Fuel is, without a doubt, one of the key components of an airline’s operating expense. But what about the other costs such as salaries, maintenance, and aircraft lease? Even though the airline industry is technologically sophisticated, it is still very labor intensive and salaries, wages, and benefits were the biggest costs in 2017. For instance, an average mainline flight cost American Airlines nearly $10,800 in salaries, wages, and benefits last year. Nearly 16% of this expense can be attributed to pilots and flight crew instructors, and another 13% to flight attendants. The remaining 71% can be attributed to maintenance, service, cargo, security, administrative, and other personnel. We believe that salaries and wages are correlated to available seat miles and therefore, longer flights with higher capacities imply higher salary related expenses.

 

Cost Comparison: A Flight From New York City to Los Angeles With Capacity of 160 Seats

Let’s take a specific case of a typical flight from New York City to Los Angeles with a capacity of 160 seats. Such a flight will travel nearly 2,475 miles and will be airborne for nearly 5.5 hours. So how is the operating cost of this flight likely to vary across major airline companies? Our analysis suggests that the cost of operating such a flight is likely to be highest for United Airlines, followed by Delta, American, and Southwest. You can visit our interactive dashboard and see cost comparisons for any route, by inputting Air Miles, Flight Duration, and Number of Seats in the aircraft.

Why Are Operating Costs Of A Comparable Flight Likely To Differ Across Airlines?

There are multiple reasons why some airlines can operate a particular flight route more cheaply than others. These reasons include success of fuel hedging strategies, aircraft size, fleet age, labor efficiency and others.  We estimate that Delta has significantly higher employee cost per available seat mile (ASM), while United Airlines is spending a lot on aircraft rent and purchases. It is noteworthy that Southwest Airlines is spending the least amount on maintenance and repairs (normalized on per seat-flight hour basis), which is a product of number of seats flown and flight duration.

 

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