Calculating airline ticket prices

[Gingerbread Man]

I am doing a piece of coursework for an Aerospace Engineering degree where I have to calculate a return ticket price for a B747-400 from LHR to San Francisco Intl based on the operating costs etc. Does anyone know of any websites that can tell me, or can anyone tell me, how airlines calculate the amount of profit they put onto a ticket price. I have worked out average ticket prices for economy class, but they are all far lower than actual fares, so I am wondering where the extra cost comes from.

I turn to you fine people because BA did not reply to my email .

Many thanks and kind regards.

Ginge

[Profit Max]

I don't think that the costs of operating an aircraft and the price of an airline ticket have a very close correlation - marginal costs are virtually zero, so all airlines (except NOW?) use some kind of price differentiation to maximise profits. Think of all those fixed costs!

Profit Max

[Boss Raptor]

You could very roughly calculate the cost of operating the flight...very roughly include conservative estimates for infrastructure, CRS usage, marketing etc....but then you have to consider different classes and yield management fare structures within those classes...almost impossible task...(and then you have belly cargo revenues to consider in the bigger equation). You have done about as far as you can be reasonably expected to go.

Yield management = how to squeeze the max revenue out of every flight dependant on demand, capacity, elasticity of demand/pricing, customer and so on...

Daft/unfair question to ask you for coursework in my opinion...as the answer is not quite how long is a piece of string but is very much more in depth and is specialised airline economics in the case of the yield management

If you'd like to PM me your basic figures I'll have a look through.

[Cyrano]

Gingerbread Man:

This is not exactly applicable but may help a little. Easyjet has a page on their website illustrating the breakdown of costs (and, implicitly, their margins, but you can get that from their annual report). See
easyjet cost breakdown

[newswatcher]

These costs from US might help

motley fool article

[Gingerbread Man]

Thanks very much for the replies so far guys, they've been a great help.

"Efficient use of airports: [the airline] flies to main destination aiports throughout Europe, but gains efficiencies through rapid turnaround times, and progressive landing charges agreements with the airports

(Taken from the EZ link above)

Can anyone explain to me what "progressive landing charges agreements" might be? I know that airlines have to pay landing charges etc, but i'm not sure how "progressive" charges cut prices.

Thanks again.

Ginge

[Boss Raptor]

An educated guess on 'progressive landing charges' as it is not that clear;

That instead of paying a standard fixed landing fee and passenger charge tariff (e.g. fixed £1,000 per landing and then £5 a head) EZY have got themselves a deal whereby they just pay a charge per landing proportionality (plus the passenger fee) So if they are only 50% full they only cover half the landing charge, 80% full 80% of the charge) i.e. it is applied 'progressively' - in stages