Airlines Make a Weirdly Low Profit on Your Ticket
Jennifer Billock December 07, 2018
Creative abstract business air travel, mobility and communication concept: modern touchscreen smartphone or mobile phone with airline internet web site offering booking or buying airliner tickets online, credit cards and passports on laptop or notebook computer PC keyboard with selective focus effect
You’re not alone if you think that plane tickets are way too expensive for the profits that airlines are making annually. But once you break down how much the airlines are making per ticket after their costs, you’d be surprised at how little of a profit they’re actually making.
How much did you pay for your last flight? Probably a couple hundred dollars at least, right? That’s pretty standard across the air travel industry—in fact, one of the more popular flights, New York to Los Angeles, averages out to about $326. According to Mel Magazine, in 2017 the airline industry pulled in about $38 billion in profit, yet still only netted about $20 revenue per ticket. It leaves many people wondering: What the heck is happening to the plane ticket money?
Mel decided to break down that $326 price tag using statistics from Airlines for America to see just where the money is going. Taxes added up to around $34, so minus the profit and tax, that leaves $272. Another 32.5 percent of the ticket, about $88, goes to personnel and airline employees. From there, 20.1 percent goes to fuel costs, eating up about $55 more. Depreciation with each flight hits at $19 per ticket, and maintenance is a staggeringly low $3.25. That’s less than peanuts, financially speaking—food costs about $5 per passenger. Then comes a slew of other costs: “office supplies ($1.63), advertising ($1.63), communications for boarding ($2.17), insurance ($0.54) and commissions for third-party sellers ($2.45),” Mel reports. Add in $5 for landing fees, $11 for terminal rental, $23 for professional services related to the airline, $35 for other transport-related expenses, and $18.50 for other operating expenses.
And that’s it – the airline makes $20.82 in profit.
[Photo: Shutterstock]
Hogwash propaganda. The average price given is FAKE. Please stop snowing us. We know what we pay, and it is not any near what you gave. To boot - you selected the only route that has some tiny competition going. All in all - the only useable info is in the breakdown that we can apply to the real prices we pay. It shows that the airlines are making about 150% profit. No wonder the execs retirement funds are exploding.
If the average ticket is $326 and they make $20 net profit...that's more than 6% profit, which is not "weirdly low". Car manufacturers like Ford have net profit margins of less than 4% and in many industries, the net profit margin can be less than 1% and many times less than 0%.
This breakdown shows exactly why many airlines have gone to revenue based systems of rewarding loyal passengers, and it highlights how important high-value flyers are to the airlines.
I haven't seen a NY-LAX (nonstop) ticket for $326 in a long time. Even if the average profit was $20 per ticket, they are raking in billions from ancillary revenue like advance seat assignments, baggage fees, change fees, meals and a slew of others.