Airline Cost Structure(Understanding the cost heads)
Elements of CostThe elements of cost of airlines can bedivided into three categories:1.Direct operating costs2.Indirect operating costs3.Overheads costsThese costs are incurred by thedomestic as well as internationalcarriers and hold relevance forcheap flights provided by LCCs orluxury travel by the full servicecarriers.
Elements of CostThe direct operating costs are relatedto the airplane as well as passengers.These comprise those heads of costswhich can be directly assigned to theoperations of the airplanes or thecomfort of passengers.In order to provide lowest air fare tothe customers, airlines strive to reducetheir direct operating costs by focusingon efficiency.
Elements of CostIndirectly costs are not directlyincurred during the course of airplaneoperations but the airlines chargepassengers for these cost-heads forboarding the flight.
Elements of CostIn order to enable hassles freeoperation of flights, airlines incurcertain overheads. Generally, theseare managerial expenses towardssales, marketing or HR