Flying airplanes and making money from it is a good business model, but behind the scenes, airplanes with very complex structures have various costs, especially fuel, maintenance and leasing. So, how do airline companies become profitable despite having so many cost items? Let’s take a closer look at the subject.
Operating an airline and making a profit
There is a cliché in the aviation industry: “Airplanes make you lose money on the ground.” This saying actually constitutes the basic logic of making money in the sector: Keeping the plane in the air as much as possible. Calculating the cost of an aircraft on the ground; It is difficult because it depends on many variables such as the type of financing, route, type and passenger load factor.
But the planes; There are costs for many items such as accommodation, parking, ground services, fuel, oil and external electricity. Among all these items, companies spend the most on fuel and oil expenditures, which constitutes approximately 35 percent of total costs.
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For airline companies, having planes in the air means profit. In order to ensure this situation, especially the short-haul airline companies (turnaround time) try to keep the turnaround time of the aircraft to a minimum level after landing.
Although operations such as taxiing the aircraft, unloading, reloading, cleaning, providing fuel and other necessary things, and reducing the loss of time in picking up passengers seem like small details, they have great economic contributions. Every minute earned means profit for companies.
For this, companies do some special and interesting studies. For example, Ryanair, a low-cost airline company, has managed to save time lost during cleaning with the simple decision of removing seat pockets on its planes. Thus, he was able to send his planes to take off earlier. On long-haul flights, the return time is less important than in short-haul flights.
One of the cost items of aircraft is their maintenance. In addition to the periodic scheduled maintenance, if the aircraft breaks down due to a situation in flight or on the ground, it is taken into maintenance again. The basic principle in aircraft maintenance is to make the aircraft suitable for flight as early as possible. Maintenance companies make very detailed maintenance plans to achieve this and try to increase efficiency.
Some airline companies use leasing methods instead of buying planes. Although this is a situation that provides profits for companies in the short term, it can bring a serious financial burden when planes have to be on the ground, as in the pandemic period. Let’s also add the expenses of the flight crew and other employees in the airline to the costs.
So how do airplanes make money while in the air?
The revenues of airlines, like their expenses, depend on many variables. These; Calculating revenues is again a very complex task as it includes variables such as business type, flight route type, passenger occupancy rate and ticket price policies.
The airline’s economic success is often beyond the control of its management. This situation is more related to the decision of the people who will travel whether to fly or not. In these decisions of the people, the economic situation is directly related to the conditions such as health concerns (such as the corona pandemic) or the atmosphere of fear after terrorist acts. For this reason, airline companies sometimes make losses.
In order for the airline company to become profitable, the passenger fees must meet the above-mentioned costs. If this situation is achieved, the company is making a profit. But this situation includes more details than we mentioned.
Therefore, it is only the job of managers and professionals in the sector to know how much an airline earns in real terms. For 2022, our flag carrier THY announced a net profit of 2.7 billion dollars and Pegasus 431 million Euros.
Transactions such as selling the tickets with a close flight date at a higher price also bring extra profit. Carrying cargo is one of the ways to earn money in airline business. However, the income of cargo transportation also depends on many variables.
Despite all the remarkable costs, airline companies can often become profitable if it is not a time to pass through abnormal conditions (such as the corona pandemic). However, one of the difficulties of the job beyond the cost is to establish the infrastructure in accordance with the various quality standards and rules set by the aviation authority (General Directorate of Civil Aviation) and to ensure its continuity.
We explained how airline companies were able to become profitable despite many costs. What do you think about this subject? You can share your views and thoughts with us in the comments.