What’s the airline’s cost of your ticket?

How helpful would it be to know the airline’s cost of any ticket?

Procurement pros often use cost modeling to estimate profit margins, then use that as  context for price negotiations.

But airline pricing doesn’t depend much (some would say at all) on costs – it’s all about supply and demand.

Evan Konwiser and I are developing a website aimed at this issue.  The initial focus is on the consumer market, but we are keen to understand the potential for the corporate travel market as well.

Your feedback will be greatly appreciated!  Click here to weigh in using this 8-question, 3-minute survey: https://aytm.com/r762623

Feel free to share the survey link as you wish.  The survey will close out after 250 responses.

Alternatively, your comments here are most welcome, as always.

This entry was posted in Airlines, Data, Innovation, Travel Procurement and tagged , , . Bookmark the permalink.

9 Responses to What’s the airline’s cost of your ticket?

  1. caroline says:

    Very interesting initiative. I’ve left my feedback & yes this would be very interesting for corporate travel!

  2. Scott – I’m a fan of the tool. I’d like to see the ability to toggle between coach and other cabins, especially since full-service network carriers dedicate >10% of their seats to premium, and almost 20% of the real estate on, single-aisle aircraft. In International, long-haul, the premium floor-space goes up dramatically (50% of total), so a one-size-fits-all approach could over charge for coach, and undercharge for premium. This is great work and provides an excellent foundation for additional features – especially the link to Kayak to see if you can beat the model price.

    • Scott Gillespie says:

      We’re with you on the cabin-specific costs. The challenge is getting fact-based information on premium cabin paid load factors. We haven’t found that data, so if anyone has suggestions, we’re all ears!
      Meanwhile, we’ve made some estimates of the paid load factors in the premium cabins, and allocated costs accordingly. This leaves a cabin-adjusted breakeven cost for the Coach seats…not perfect,but hopefully reasonable.

  3. Joseph Boschert says:

    From the consumer’s mindset, how does this differ from Kayak’s Price Trend or Bing Travel Farecast?

    • Scott Gillespie says:

      Bing and Kayak are providing airfare price trends and forecasts, where Farely is reporting the breakeven cost. Pricing changes dynamically, but the underlying costs don’t change much – assuming a constant load factor. Farely allows a consumer to compare the cost with the price…at least that’s the intent. Sounds like we could do a better job of making this more clear :)

  4. Sophie says:

    there is a very simple way to do this. get the airline’s annual report and find their unit cost. multiply this by the number of kms of the flight you are looking at. for premium cabins go to seat guru and find the measurements of the premium seat vs economy. look at how many rows of economy could be substituted for rows of premium (eg 3 rows of premium economy could substitute for 5 rows normal economy, you need to find a ratio that leave little remainder). then divide the number of premium seats by the number of possible economy seats. for premium economy you should find a ratio of about 1.5, business class 2-3.

    there are of course a range of other factors that alter the cost of a particular flight over another, eg unit cost for a short domestic trip is much higher than international due to fewer number of seats and fuel burn generated on short turnarounds.. a range of others factors also apply.

    • Scott Gillespie says:

      Agreed, Sophie. We use a similar method for indexing costs based on seat real estate – definitely the right way to go.

  5. Micha Shalev says:

    Hi
    Nice one.. Seems to be similar to the carbon emission loading models.
    Cheers.. Micha

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