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Airline cost structure

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.

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Airline Cost Structure (Understanding the cost heads)
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.
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.
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.
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
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