Question

Question 1:

Compare and contrast the cost structure of (i) the airline industry in general and (ii) the low-cost carrier, in terms of cost classifications.

Question 2:

Discuss the impact of Covid-19 on the profitability of the airline industry – general and low-cost carriers alike, due to its cost structure – cost classification and cost behaviour.

Answer 1

Line item		Typical full cost carrier 156 seats,1,250 KM sector,65% load factor	Typical low cost carrier 180 seats,1,250KM sector, 80% load factor
Air craft	$ month BH / Day	$3,40,000 8	$1,95,000 12
Fuel	Gallons/BH $ /Gallon	820 $1.40	800 $1.40
Maintenance	$/BH	700	600
Cockpit crew	Anual salary	$ 1,20,000	$1,00,000
	Benefit load	35	25
	Cabin crew	$15,000	$15,000
	BH/month	60	65
Cabin crew	Annual salary	$50,000	$40,000
	Benefit load	$25	$20
	Cabin crew	6	4
	BH/month	60	65
HOTAC	$/crew member	$150	---
Airport/nav	$/turn, aircraft	$2,500	$2,000
	$/leg,ldg/nav	$750	$500
	$/pax,handling	$5	$3.50
Onboard	$/Pax	$5	$1
S&D	$/pax	15	5
G&A	$/pax	10	5
Cost per available seat Kilometer		$8.19	$4.17

Source: Mckensey Report

BH - Block hour

HOTAC- Hotel accomodation

Ldg/Nav - Landing and Navigation

Pax - Passenger

S& D- Sales and Distribution

G&A - general and administrative

2)Impact of Covid 19 on Airline Industry

Air traffic industry is largely vulnerable to external factors, like natural disasters ,oil crisis etc. Covid 19 hit badly its patch on Air industry interms of its yield and load factor. Some Air lines have been brought to a complete stop. The following discuss it in detail.

SUMMARY OF PASSENGER AND FREIGHT TRAFFIC Passenger and freight traffic World scheduled passenger and freight traffic by region of airline domicile - Revenue Tonne-Kilometres milions) Asa Puce 34 Free 2 LOAD FACTOR 81.9% Revenue Passenger-Klarneters fritionat 8,328,776 Available Sest-Klometers onions: 10,174,828 Las American Nom America 230 Modest 10.45 Share of Revenue Passenger. Kilometres by Airline Type LOAD FACTOR 49.3% Freight and Mal Tonne-Klometers milions 262,333 Available Fraight Tome Kilometers milions 532,000 La SUCEATA WATS20 For more on www