Maryam Zavareh Source DOT Form 41 Data base Traffic financial and operating cost data reported to the DOT by US airlines Published Quarterly Detail of reporting differs for different expense ID: 162275
Download Presentation The PPT/PDF document "Chapter 5.1: Airline Cost Categorization" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Chapter 5.1: Airline Cost Categorization
Maryam ZavarehSlide2
Source :DOT Form 41 Data baseTraffic, financial and operating cost data reported to the DOT by US airlinesPublished Quarterly
Detail of reporting differs for different expense categories (Example: AC Operating expense and other expenses based on AC type and region)
IntroductionSlide3
2 different Approaches for partitioning airline operation costs:AdministrativeFinancial Accounting StatementFunctional
More detailed cost comparison across airlines and even across different aircraft types
Administrative vs. Functional Cost CategoriesSlide4
Salaries and related fringe benefits for all personnel (general management, flight personnel, maintenance labor, other personnel)
Materials Purchased (fuel & oil,
parts, passenger food,
other materials)
Administrative Cost CategoriesSlide5
Services Purchased (advertising &promotions, communications, insurance, maintenance, commissions, other services)
Landing Fees, Rentals, Depreciation, other ExpensesAdministrative Cost CategoriesSlide6
Administrative Cost Allocation
Labors (Salaries)
MaterialsServicesSlide7
Not much detailed analysis Difficult to separate out the components of salaries, materials and services that are explicitly associated with operating the aircraft, as opposed to ground operations.
Limitation of Administrative Cost CategorizationSlide8
allocates costs to the different functions within the airline’s operationFlight Operating Costs
Ground Operating CostsSystem Operating Costs
Functional Cost CategoriesSlide9
Direct operating costsFlying operations – Flight crew, Fuel costs
Maintenance – routine maintenance, extensive major checks, “labor & parts”
Form 41 reports maintenance for direct airframe,
direct
engine and overhead/
burden
Depreciation
&
Amortization
– Capital costs of airline assets
Flight Operating CostsSlide10
Aircraft servicing – handling aircraft on ground, landing fees
Traffic servicing – processing passengers,
baggage and cargo at airports
Promotion
and sales
– airline reservation centers, ticketing offices, travel agency
commissions
, and distribution system fees
Ground Operating CostsSlide11
Indirect operating costsPassenger Service– meals, flight attendants,in-flight
servicesAdvertising and Publicity
General and Administrative – can’t be associated to a particular activityTransport-related
– costs associated with the generation of transport
related revenues
. Fees paid to regional airline partners, extra baggage expense, and
other miscellaneous overhead.
System Operating CostsSlide12
Functional Cost AllocationSlide13
In many respects similar in structure to both functional and allocation schemes used by airlines and government around the worldICAO Cost CategoriesSlide14
Overall , the structure of the cost allocation scheme is very similar.Comparison Between ICAO and Form 41 Cost Categories
Category
ICAO
Form 41
Maintenance
Single Category: Maintenance and overhaul
Three Categories:
Direct
Airframe Maintenance
Direct
Engine
Maintenance
Maintenance Burden
Ticketing, Sale, Promotion
Single Category:
Ticketing
,
Sales
and Promotion
2 Main Categories:
Advertising
Distribution
Cost Slide15
Flight Operating Costs (FOC)Reported per block hour (correlated with the amount of time aircraft is being utilized)Aircraft Servicing Cost
Reported per aircraft departure, including cleaning, fueling, marshalingTraffic Servicing CostReported per enplaned passenger, including the processing of passengers and their baggage
Cost Drives by Functional CategoriesSlide16
Passenger Service CostReported per revenue passenger kilometer (RPK) Promotion and Sales CostsReported as a percentage of revenue, responsible for the generation of revenue
Other Indirect and System Overhead Costs
Reported as a percentage of total operating expenses Cost Drives by Functional CategoriesSlide17
Total Operating Cost per Available Seat Mile (Unit Cost-CASM)Total Operating Expense per Passenger Enplaned or RPM
Other Cost Category ComparisonSlide18
Thanks for Listening.Any Question?Go to http://catsr.ite.gmu.edu/
The Global Airline Industry
Images were selected from various internet sites. Notes