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ATA reports continuing rise in costs in 3Q2010

7-Jan-2011 11:53 AM

Air Transport Association of America (ATA) reported (06-Jan-2011) the composite cost index for US passenger airlines rose 5% year-on-year to 209.8 in 3Q2010, outpacing the 1.2% growth in the US consumer price index (CPI). The three largest components of the index were fuel, labour and transport related expenses*, respectively. Other third quarter highlights include:

  • Improvements in fuel efficiency, labour productivity and revenue generation helped offset the higher composite costs, pushing the break-even load factor down 8.7 ppts to 75.9%, the lowest level since 1Q2001, and enabling the first consecutive quarters of profitability since mid- 2007;
  • Combined fuel and labour costs accounted for half of airline operating expenses. The average price paid for fuel rose 10.6%, from USD1.92 to USD2.13 per gallon. The average cost (wages, benefits and payroll taxes) of a full-time equivalent worker rose 5.6% to a high of USD86,603;
  • Other rising cost categories included advertising and promotion (up 12.8%), aircraft rents and ownership (up 9.4%), travel agency commissions (up 6.1%), landing fees (up 3.8%) and interest (up 3.6%);
  • Other categories seeing year-over-year declines in input costs included maintenance material (cost of maintaining and purchasing materials for airframes, aircraft engines, ground property and equipment, down 6.7%), property rents and ownership (down 5.1%) and non-aircraft insurance (down 3.8%). [more]

*Comprises primarily of payments by mainline carriers to their regional partners to transport passengers and cargo on their behalf

ATA: "The third-quarter results highlight the continued importance of offsetting the rising costs of doing business through operational efficiencies, productivity gains, and diversification of revenue streams. Thanks to a strengthening economy and the continuing efforts of airlines to adapt to a volatile environment, the increase in costs did not stand in the way of profitability this quarter,” John Heimlich, Chief Economist. Source: ATA, 06-Jan-2011.