Being such enormous companies, you might wonder where all the money comes from. Whilst it may be a lot of money, it definitely isn’t easy many, as there is a lot that goes into running an airline business.
What Does Flying Cost?
If you think of your run-of-the-mill short-haul flight, it is especially hard for airlines to get their financial game right. Airport fees, petrol costs, crew members including the pilot, aeroplane leases and therefore also depreciation, in some cases food and beverages, the list goes on and on, must be paid only to fly from A to B.
On top of that, and this is especially hard, customers want to keep their spendings at a minimum, i.e. the market becomes highly competitive.
Now does this imply that profit margins have to be low? No, it certainly doesn’t, as precise planning is the key to success.
To give you some figures, the Wall Street Journal estimated the average profit per ticket for the seven largest airlines of the US at $17.75, which equates to a profit margin of 9%!
Now, where the real money lies for airlines are long-haul flights, as the profit margin increases rapidly, and passengers who want to spend more can do so by booking Business or First Class tickets!