Now combine decreased passenger turnout with rising fuel costs and increased contracting costs (food, cleaning, etc.). The revenue generated from one passenger flight is substantially less than most people think and when flights are not filling up, especially for smaller carries, it is financially unfeasible to stay afloat. Don't forget taxes, operating costs, landing fee's, etc.
Your only scratching the surface. Let me break down some of my companies operating costs for FY 2007 - Which was a gain - the numbers posted are in millions - i.e. Passenger Revenue was 8.1 Billion/ Cargo Revenue was 138 Million.
1. Since we’re in the business of carrying passengers, it’s no big surprise that our
largest revenue source is our customers. Mainline revenue includes passenger
revenue collected from all US Airways mainline flights...................$8,135
2. Our Express passengers – both from wholly owned and contract Express
carriers – are also an important source of revenue..................................... +$2,698
3. Cargo revenues are money from transporting mail and freight........+$138
4. Operating revenue also comes from other sources like ground handling for
other airlines, interline handling fees, selling frequent flyer miles, liquor sales
and excess baggage fees.................. +$729
A. The sum of items 1-4 are our total operating revenues
= $11,700
5. In 2007, fuel and related taxes made up our largest single mainline expense..-$2,630
6. US Airways hedges fuel 12 to 14 months into the future. Fuel prices fluctuate daily, so the
value of future hedges can go up and down. In 2007, we recognized a realized hedging
gain, which means the actual price of fuel purchased in the quarter was higher than our
hedged price...+$58
7. We also booked what's called an Unrealized hedging GAIN, which accounts for potential
future gains as the current market price of fuel was higher than our hedged position. If market prices were to fall below
the hedged price, we would have had a loss instead of a gain ..........................................................................................+$187
8. Salaries and related costs include salaries and benefits for all employees. This line also includes Profit Sharing
(see 8a) ... -$2,302
8a. Employee Profit Sharing is included in "salaries and related
costs." Because we were not profitable in Q4, our profit sharing pool was
reduced to $49 million.
9. Next come Express expenses, which include the costs of the wholly
owned subsidiaries, and what we pay to purchase capacity from contract
carriers.................................................................................................. -$2,594
10. We have to have airplanes to fly, and we rent the majority of our fleet.
These charges are simply called aircraft rent...................................... -$727
11. The cost to maintain and repair our beautiful birds rolls up into
aircraft maintenance expenses.................................................... -$635
12. Other rent and landing fees includes rent for facilities at airports,
airports' landing fees, etc..................................................................... -$536
13. Selling expenses include the distribution costs such as credit card fees
and fees we pay to the global distribution systems (Sabre, Apollo, etc.), as well as
advertising expenses ...................................................................................... -$453
14. Special Items, net includes merger-related transition expenses.................................................................................... -$99
15. Depreciation and amortization is the cost for the usage of aircraft parts, office equipment, ground equipment,
and any other assets that the company owns and that we expense over the lifetime of the asset.......................................... -$189
16. Finally, other expenses include things like hotels, per diem, telephone and utility costs, etc. ............................. -$1,247
B. The sum of items 5-16 is our total operating Expenses
= -$11,167
C. Total Operating Revenues (A) less Total Operating Expenses
(B) equals our Total Operating Income = $533
17. Interest earned from money we have in the bank is interest income..............+$172
18. We incur expenses for borrowed money (debt), called Interest expense........ -$273
19. Finally, we incur Other non-operating expenses or gains........................................ +$2
D. Combine items 17-19 for Total Non-Operating
Expenses, Net = -$99
E. Combine the Operating Income (C) and Non-Operating
Expenses (D) for Income Before Taxes = $434
20. Next up, Uncle Sam. Without getting too technical, we were able to
use $7 million of accumulated losses from the "old" US Airways to reduce the
amount currently owed to Uncle Sam. Under the accounting rules, we are taking a non-cash charge of $7 million for using these old losses. This does not affect profit sharing ...-$7
F. That brings us to our Net Income
(including special items) = $427 or $4.52 per diluted share
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Clear as mud on some of the hard operating costs airlines are incurring? I'm actually looking for a new job. I knew it was down hill around last November.