Expenses and Costs in the Air Industry

This assignment examines the various expenses and costs incurred by the air industry, including labor, fuel, catering, insurance, landing fees, and overflight charges. It analyzes how these costs directly influence ticket prices and explores potential strategies for cost reduction within the industry.

Running head: AIR INDUSTRY 1
Air Industry
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The airline industry offers service to nearly every part of the world and therefore is seen
as a fundamental part of the global economy stabilizer. The airline industry itself as an economic
power also assists some other related industries to grow (Vasigh & Fleming, 2016). However,
there are a number of challenges that the industry undergoes during its operation. Therefore, this
paper will mainly address the expenses and costs that the air industry faces and how they have a
resultant effect on the ticket prices and flying occurrences.
Operating an airline industry is not arguably expensive especially when it comes to the
management of the labor force. The labor of managing an airline industry accounts to about 35%
of the total airlines operating expenses. This ranges from hiring the pilots, flight attendants
among other management teams. The cost of paying the salaries to the entire flight staff is
usually huge. As such, the flight management must consider this factor in the ticket pricing in
order to generate some profits.
Also, fuel cost for the airline industry is usually very expensive. Fuel cost represents one of the
largest chunks of airline industry expenditure. Averagely, fuel expenses account for about 29%
of all the operational expenditure. Jet fuel is the main type of fuel which is used by the passenger
carrier flights among other aircrafts. This fuel is usually a product of oil and therefore the two are
correlated. With the fluctuation of oil in the global market, the jet fuel is usually affected too.
Therefore, when the oil prices go up the passenger tickets and other air transport means are also
likely to increases so that the industry can realize some profits.
Flight catering is becoming a more important event in the air industry. For instance, a
large airline which moves over long distances is required to serve its passengers on board with
meals and other required necessities. Therefore, it is required to load thousands of items before it

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flies (Bieger and Wittmer, 2006). These items not only range from meals but also toilet papers,
newspapers, headsets among other necessities. The food items are usually fresh while other in-
flight equipment for crew and passengers use tends to be recyclables. The current airline industry
is very competitive and therefore the industry that provides the best onboard services are the
most preferred by the passenger. Therefore, the industry has to incur a lot of costs to achieve this.
In the long run, the cost of passenger tickets may also be affected.
Furthermore, insurance is also a major key expense that the industry faces. Aviation
insurance is usually meant to cover uncertainties in the operations of the aircraft and the risks
involved in the aviation industry (Pearlson et al., 2013). The aviation policies are usually
different from other modes of transport. This is because they tend to cover aviation terminology,
limits, and clauses specific insurance. These insurance are usually expensive and adds cost to the
operation of the airline. There are various types of aviation airlines that range from public
liability, passenger liability, combined single limit, ground risk insurance and inflight insurance
(Belobaba et al., 2015).
Air industry also faces fees that are associated with the landing of their airlines in
different airports across the world. Landing fee is usually paid by a particular aircraft so as to
gain access to a landing space. The amount of fees to be paid for landing, however, varies among
different airports (Miller & Chen, 2004). This may result due to availability and the number of
aircrafts operating the same airport. Those airports that are congested may charge a higher
landing fee to create a free space for landing. The money that is collected from the landing fee is
in most cases used in the maintenance of the runways, airport buildings, and taxiways. Such fees
also contribute to the pricing of a passenger ticket.

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Overflight fees are another cost that the air industry must adhere to so as to become efficient in
their operation. Every country in which the long-distance flights have to pass through imposes
charges for using their airspace (Cento, 2008). Therefore, this affects the air industry to some
extent.
Conclusion
The air industry is one of the sectors that are crucial in the global economic drive.
However, this sector is faced with a number of challenges ranging from fuel cost, labor cost,
airport fees, insurance and catering costs. These costs do have a resultant effect on the passenger
tickets in order to realize the expected profits. However, the industry is investing in the
alternatives to achieve an effective cost-cutting to even increase their profits in operation. With
the current decrease in the jet fuel prices, the industry is projected to make a tremendous profit
and affordable passenger prices.

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References
Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015). The global airline industry. John Wiley
& Sons.
Bieger, T., & Wittmer, A. (2006). Air transport and tourism—Perspectives and challenges for
destinations, airlines and governments. Journal of Air Transport Management, 12(1), 40-
46.
Cento, A. (2008). The airline industry: challenges in the 21st century. Springer Science &
Business Media.
Miller, D., & Chen, M. J. (2004). Sources and consequences of competitive inertia: A study of
the US airline industry.Administrative science quarterly, 1-23.
Pearlson, M., Wollersheim, C., & Hileman, J. (2013). A techno‐economic review of
hydroprocessed renewable esters and fatty acids for jet fuel production. Biofuels,
Bioproducts and Biorefining,7(1), 89-96.
Vasigh, B., & Fleming, K. (2016). Introduction to air transport economics: from theory to
applications. Routledge.