Airline Costs Decline for second consecutive quarter.
Press Release Summary:
Airline Cost Index, incorporating data through second quarter of 2009, showed composite cost index fell 29% in second quarter of 2009 versus same period of 2008. Largest components of index, which includes all operating expenses and interest expense, were labor, fuel, and transport-related expense. While average price paid for fuel fell 36%, other categories seeing year-over-year declines in input costs included aircraft rent/ownership and maintenance material.
Original Press Release:
Air Transport Association Reports Second Consecutive Quarter of Airline Cost Declines
WASHINGTON, Nov. 3, 2009 - The Air Transport Association of America (ATA), the industry trade organization representing the leading U.S. airlines, today released its quarterly Airline Cost Index, incorporating data through the second quarter of 2009.
The composite cost index fell 29 percent to 183.9 in the second quarter of 2009, versus 259.4 in the same period of 2008, easily outpacing the 0.9 percent decline in the U.S. Consumer Price Index (CPI). The three largest components of the index - which includes all operating expenses as well as interest expense - were labor, fuel and transport-related expense,* respectively. Other highlights include:
Combined, labor and fuel costs accounted for nearly half of airline operating expenses. The average price paid for fuel, which is still disproportionately high, fell 36 percent from record levels one year ago, while the average cost of employing a full-time equivalent worker (wages, benefits and payroll taxes) rose 6 percent to $79,657.
Other rising cost categories included aircraft insurance (up 24 percent), interest (up 22 percent), landing fees (up 7 percent) and professional services (up 6 percent).
Other categories seeing year-over-year declines in input costs included aircraft rent and ownership, food and beverage, maintenance material (cost of maintaining and purchasing materials for airframes, aircraft engines, ground property and equipment), nonaircraft insurance, travel agency commissions, communication, utilities and office supplies, and transport-related expense.*
The drop in the cost index helped reduce - but not eliminate - the unfavorable gap between average break-even and actual load factors from 6.3 percentage points to 1.8 percentage points.
"Airlines remain intensely focused on reducing expenses and identifying additional sources of revenue, but this is a challenging environment," said ATA Chief Economist John Heimlich. "Carriers are demonstrating tremendous cost discipline in the face of a weak demand environment and continuing fuel-price volatility."
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 with macroeconomic indicators.
Annually, commercial aviation helps drive $1.1 trillion in U.S. economic activity and more than 10 million U.S. jobs. ATA airline members and their affiliates transport more than 90 percent of all U.S. airline passenger and cargo traffic. For more information about the industry, visit www.airlines.org.
*This category primarily comprises payments by mainline carriers to their regional partners to transport passengers and cargo on their behalf.
