Classification of cost

Operating costs of an aircraft can be conveniently divided into two parts: Direct Operating cost (DOC), being those costs which vary according to the type of aircraft used, and indirect operating costs (IOC), which are those not affected by aircraft type. We can sub-divide both the DOC & IOC into fixed and variable. A pure DOC/IOC division can be termed a fleet-related classification and the fixed/variable division is an operationrelated classification

Classification of cost
Total Operating costs

Direct Operating Costs

Indirect Operating Costs

Fixed

Variable

Fixed

Variable

Cost Components
the fuel calculation comprises the following: -Price of fuel: Airline management is hostage to the movements of the overall price of oil, which are notoriously difficult to forecast. OPEC controls around 40% of world production and thus has a considerable influence on the price of crude. One way airline can delay the effect of fuel price rise on the balance sheet is to hedge. Delta & BA hedge up to 75%. Moreover, individual airline that are bulk user at an airport are able to negotiate discount on published price.

Fuel costs (DOC): The basic components of

Cost Components
-Aircraft fuel consumption: The fuel cost historically diminishes as the price of the fuel fell in real term, as airline reequipped with more fuel efficient aircraft. -Network design & operation: Huge variation in fuel burn occur according to how aircraft is used. Aircraft are at their most efficient when at altitude in steadystate condition, but network comprising short sector inevitably mean that a greater proportion of an aircrafts life is spent in relatively inefficient phases of flight, such as take-off, climb & low altitude maneuver

Cost Components
Maintenance Costs (DOC): Direct Maintenance cost (DMC) covering labour, material costs associated with the maintenance cost of airframe & engine, Indirect Maintenance cost (IMC) referred to as burden covering overheads, administration, tooling, testing equipment & facilities, record keeping, supervision & quality control. Line maintenance: It covers checking tyre pressure & oil level, which must be carried out either on a daily or weekly basis. It consists 10%-15% of DMC.

Cost Components
Airframe

maintenance: For each aircraft type the Manufacturer issues a Maintenance Planning Program (MPD) which defines tasks & time interval covering airframe structure, systems and components. The MPD reflects recommendations for maintenance, which must then be built into an operators customised maintenance program, to be certified by local airworthiness authority. Airframe maintenance is composed of checks, referred to as A, C & heavy checks or D.

Cost Components
A checks can take place every 400 flight hours & C checks every 15 months. With this rhythm it would be common for the 8th A check of a cycle to coincide with a C check. Heavy structure checks take place every 5 years, with additional structure checks every 10 years. Those tasks which are dimensioned by both flight hours and the calendar can be grouped into package in order to avoid grounding aircraft unnecessarily.

Cost Components
Engine Maintenance: is the function of both hours as well as cycles or take-offs. Every time an aircraft takes off the engines are running at nearly their maximum power output, causing wear & thermal stress. Operating conditions such as hot & highaltitude airfield and short runway also contribute to wear. Factors influencing Maintenance costs Airline influence-The degree to which an airline sub-contract or undertake its own maintenance determines the degree of investment made in facilities & labour costs incurred.

Cost Components
Aircraft

influence- The ageing of an aircraft will affect baseline maintenance calculation in two areas. Firstly, new aircraft enjoy a honeymoon period when actual DMCs are below predicted mature level- due to combination of newness effect, particularly of engines. Secondly, the effect of warranties on components. In general, maintenance will be lower than the mature levels for up to 4-5 years after entry into services.
Geographical

influence- Operators based in remote locations must carry the additional cost of being far from a supply of spares. Desert operations result in increases damage from sand ingestion & coastal operations are plagued with corrosion issues.

Cost Components
Route

network & operations- Short-haul scheduled operators have a greater challenge in maximizing their utilization than long-haul operators. It is not unusual for the same aircraft type to incur double the DMC on a short-haul compared to a long-haul network. Every take-off & landing or cycle , involves the acceleration & deceleration of engine, use of landing gear & lift devices. Also the fuselage is pressurized & depressurized & doors closed & opened. Many cyclic-related costs involves expensive items e.g. wheels, brakes & tyres. Higher average sector lengths tend to mean that aircraft performs proportionately fewer cycles in relation to hours flown.