The document discusses the different elements of cost for airlines. There are three main categories of costs: 1) Direct operating costs which are related to airplanes and passengers, 2) Indirect operating costs which are not directly related to flight operations but charged to passengers, and 3) Overhead costs which are managerial expenses for sales, marketing, and human resources needed to operate flights smoothly. Understanding these different cost elements is important for both low-cost carriers providing cheap flights and full-service carriers offering luxury travel.

1. Airline Cost Structure
(Understanding the cost heads)

2. Elements of Cost
The elements of cost of airlines can be
divided into three categories:
1.Direct operating costs
2.Indirect operating costs
3.Overheads costs
These costs are incurred by the
domestic as well as international
carriers and hold relevance for
cheap flights provided by LCCs or
luxury travel by the full service
carriers.

3. Elements of Cost
The direct operating costs are related
to the airplane as well as passengers.
These comprise those heads of costs
which can be directly assigned to the
operations of the airplanes or the
comfort of passengers.
In order to provide lowest air fare to
the customers, airlines strive to reduce
their direct operating costs by focusing
on efficiency.

4. Elements of Cost
Indirectly costs are not directly
incurred during the course of airplane
operations but the airlines charge
passengers for these cost-heads for
boarding the flight.

5. Elements of Cost
In order to enable hassles free
operation of flights, airlines incur
certain overheads. Generally, these
are managerial expenses towards
sales, marketing or HR

6. Thanks