ADDITIONAL NOTES Lecture 3 Airline Costs

ESTIMATION OF DIRECT OPERATING COSTS AEA METHOD

1. Introduction

There are many methods of estimating aircraft operating costs, each tailored to the specific
needs of the originator:

ATA Air Transport Association (1967)
AEA Association of European Airlines
SAWE Society of Weights Engineers
CEE Committee tude Economique
FEAT Future Economic Advanced Transport WG


Public domain
AI(C) Airbus Industrie (Commercial)
AI(P) Airbus Industrie (Project)
RR Rolls Royce
OPCOST Boeing
BA Airline
Lufthansa Airline



Confidential


To conform with University practice in the 3
rd
year design project we will use the AEA
method. The elements of direct operating costs are:

Depreciation DEP
Interest on loans INT
Financial:
Insurance INS
Cockpit crew CPC
Cabin crew CAC
Landing Fees LAF
Navigation charges NAV


Flight:
Fuel FUE
Airframe maintenance AMC
Maintenance
:
Engine maintenance EMC
These are estimated in $ per flight sector and
then converted into a cost per seat mile in cents.
The financial costs are usually based on a
yearly charge; to convert these into costs per
sector we need to know the number of
sectors/year. This is the UTILISATION, and
will depend on, amongst other things, the route
structure. We can, however, use approximate
expressions based on a statistical analysis of the
market. The utilisation will be affected by the
block speed, which is a function of sector
distance. [See section 9.]

2. Utilisation (U), (Sectors/year)

Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft

Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
Aircraft utilisation is a key factor in DOC analysis and is a function of the time spent on the
ground. It therefore depends on many factors:
traffic requirements
loading and unloading
refuelling
regular maintenance
unscheduled maintenance
weather
airline network
flight planning


no. of hours flown per year
Utilisation (U) = number of trips per year =
t + turnaround time

t is the block time in hours [see section 9]. Number of flight hours per year for a short haul
aircraft (<1000nm study mission) may be taken as 3,650 but could be as high as 4,000) and
turnaround time 0.5 hours. For medium range missions (1000 to 2000 nm) these two values
could be 5,100 hours and 1.4 hours respectively, and 6,500 and 3.0 hours for a long range
missions (>2000 nm).)

However, this formula should be used wisely. If, for example, you are asked to consider the
economics of one or more aircraft over a particular route, then the number of flights per day
must obviously be an integer number, and the annual number of utilisation hours would be
the block time times the flights per day times 365. In other words use your common sense
and dont be fooled by formulae.


3. Total Investment (TI), $

The total airline investment per aircraft is:

TI = Manufacturers Study Price (MSP) + Airframe Spares + Engine Spares

Airframe spares may be taken as 10% of the airframe price. Airframe price is purchase
price less the cost of an aircraft set of engines, i.e. [MSP ENP NE] where ENP is the
price of one engine and NE is the number of engines. Manufacturers Study Price is usually
taken as the catalogue price of the complete aircraft. When making comparisons between
different aircraft types it is important to make sure that comparable standards of options are
used.

Airframe Spares = 0.10 (MSP ENP NE)


Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
Engine spares (spare propulsion units) may be taken as 30% of the cost of an aircraft set of
engines:

Engine spares = 0.30 (ENP NE)


4. Financial Costs

Depreciation can be varied according to the assumptions that the company accountants wish
to make. In the AEA method it is assumed to be a full write off over 14 years (7% p.a).
Interest on any loans taken out to purchase the aircraft is taken as 5% of the total investment.
Annual insurance premium is taken as 0.6% of the purchase price (low risk).

Financial costs per sector then become:

$/sector
U 14
(TI) Investment Total
(DEP) on Depreciati

=

$/sector
U
Investment Total 0.05
(INT) Interest

=

$/sector
U
MSP 0.006
(INS) Insurance

=


Cockpit crew

A two man crew is assumed with a cost of $380 per block hour:

Cockpit crew cost per sector (CPC) = 380.t $/Sector

where t is the block time


Cabin crew

The number of cabin crew (NCAB) is taken as 1 per 35 PAX (rounded up), costed at $60 per
block hour per crew member:

Cabin crew cost per sector (CAC) = 60 NCAB t $/Sector



Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
Landing Fees

Landing fees are assumed to be $6 per metric tonne MTOW per sector:

Landing fees (LAF) = 6.0 MTOW $/Sector

where MTOW is the maximum take-off weight in metric tonnes, i.e. $6 per tonne. MTOW is
the certification-based weight on the design mission, not the DOC mission take-off weight
(the DOC mission is intended to represent a typical operating mission, which is usually
significantly shorter than the design mission; the DOC mission payload, however, is usually
the aircraft design payload).


Navigation Charges

Navigation charges are taken as a function of sector distance or stage length:

Navigation charges (NAV) = 0.5 stage length [MTOW/50]
0.5
$/Sector

where the stage length is in kilometres (1nm =1.852km).



5. Maintenance costs

Airframe maintenance costs (AFM)

The airframe maintenance equations reflect a correlation with representative maintenance
costs and can be split into labour and material. Both include a part associated with the
number of flights flown (cyclic) and a part linked to the number of flight hours. The labour
cost per sector can be approximated as:

{ } ( ) R 0.25 t 0.68 0.8
75 AFW
350
6.7 AFW 0.09 labour Airframe +
|
|
.
|

\
|
(

+
+ =

where size and accessibility issues are accounted for in the 1
st
bracket, through AFW, and the
2
nd
part is cyclic and time-dependent. Material cost is also split into cyclic and hourly time:

Airframe materials = AFP (4.2 + 2.2 (t 0.25))

AMC = LABOUR + MATERIALS $/Sector

where: AFW =airframe weight (tonnes) =MWE less weight of the engines
MWE =manufacturers weight empty (tonnes)
AFP =airframe price =MSP less price of the engines ($m)
R =labour rate = $66 per hour

Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs

Engine Maintenance Costs (EMC)

The AEA method gives formulae for calculating the maintenance costs of either turbofan or
turboprop powerplants; we will consider only the turbofan version.

Labour : LT= 0.21 C1 C3 (1 + T)
0.4
R

Material: MT = 2.56 (1 + T)
0.8
C1 (C2 + C3)

The total engine maintenance cost reflects the split into hourly and cyclic components:

Total Engine Maintenance (EMC) = NE (LT + MT) (t
f
+ 1.3) $/Sector

where: Cl =1.27 0.2 BPR
0.2

C2 =0.4 (OPR/20)
1.3
+ 0.4
C3 =0.032 NC + 0.57
T =sea level static thrust (tonnes)
BPR =engine bypass ratio
NC =number of engine compressor stages
OPR =engine overall pressure ratio
t
f
=flight time =[block time 0.25] hrs


6. Fuel

The fuel cost will be greatly affected by the fuel purchase price.

Fuel cost (FC) = Block fuel F
price
$/Sector

where block fuel is the fuel burned (not the fuel loaded) in US gallons and F
price
is the fuel
cost per US gallon. The fuel burn calculation for the mission incorporates the required
reserve fuel profile in the fuel loaded. Fuel density is 1 US gallon (3.785 litres) ~ 6.7 lb
(0.803 tonne/m
3
). A reasonable price in 2003 was 85 cents/gallon but this has risen sharply
since then (see Chapter 2).


7. Aircraft Trip Costs

The cost of flying the aircraft on one sector or trip is then the sum of the above, i.e.

Aircraft Trip Cost =
DEP + INT + INS + CPC + CAC + LAF + NAV + AFM + EMC + FC $/trip



Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
8. Aircraft Seat Mile costs

The usual DOC parameter is the unit cost expressed as aircraft cost/seat mile, expressed in
cents/seat nautical mile or in cents/seat kilometre:


mile cents/seat
length sector offered seats passenger of no.
Cost Trip Aircraft 100
cost mile Seat

=



9. Note on Block speed and Block Time

The average speed from departure of the loading gate to arrival at the destination loading gate
is obviously much lower than the aircraft cruising speed, not only because of the time taken
to taxi in and out, but because the flight speeds in climb and descent are lower than in cruise
and the time taken for actual take-off and landing do not contribute to progress towards the
destination. These delays are a smaller proportion of the total time on long haul flights, so
the block speed tends to rise with increasing sector distance.

We can use data taken from actual airline operations to get an approximation to block speeds
and hence block and flight times (Figure 3a.1).
Block Speed vs Distance


Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft



0 2,00 4,00 6,00 8,00 10,00 12,00
200
300
400
500
600
700
800
900
1,00
Distance km
Block Speed km/hr
Turbojets
Turboprops
For Turboprops Block Time =0.3 +Distance/430 hrs
Figure 3a.1: variation of block speed with distance for jet and turboprop aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
10. Some notes on aircraft performance and DOCs

To complement the methods given above it is useful to present aircraft performance in terms
of a payload-range diagram see Figure 3a.2.

At low range the aircraft can comfortably carry full payload over the desired distance. Note
that the maximum payload may be a lot bigger than that associated with maximum passenger
seating the difference is the amount of freight that can be carried in addition to passengers.

At some point as range is increased the sum of empty weight plus payload plus fuel to carry
that payload over the given distance will equal the maximum take-off weight at which the
aircraft is cleared to operate. This will give the range at maximum payload as shown. For
ranges greater than this payload must be offloaded to make way for the extra fuel needed for
the mission. This part of the payload-range curve is defined by the maximum take-off weight
(MTOW). Increasing the MTOW as shown between the 500 and 600 series will increase
the range available at any payload. [Note that between the 500 and 600 there has also been
an increase in maximum payload capacity.]

As range is increased further a point is reached where no matter how much payload is taken
off it is not possible to load any more fuel because the tanks are full. This is the maximum
tankage limit, and will give the effective payload at maximum range. It is possible to fly
further by taking out even more payload but the exchange rate between range and lost
payload is so steep that it becomes thoroughly uneconomic to do so. The point at which the
aircraft would be flying with zero payload and maximum fuel is the ferry range of the
aircraft, and represents the maximum possible distance that can be flown.

Figure 3a.2: Payload-range diagram for Airbus A340-500 and A340-600; the 500- series
is an extended range version achieved by sacrificing payload. Assumptions for both
versions are a 3-class layout and passenger+luggage mass of 95kg. Capacity above the
dotted line is freight. (From Doganis: Flying Off Course, 3
rd
ed., Routledge, 2002.)

Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs
11. Aircraft Price

In any studies you will be called upon to do (except in the 3
rd
year design project) you should
be given the aircraft price(s) i.e. MSP with which you must work. For other exercises, and
for general information, there is a reasonable correlation between aircraft price and empty
mass (for example Fig. 3a.3). Note, however, that airframe price varies also with payload,
range and speed; and engine price is a function of T and specific fuel consumption.



Figure 3a.3: Aircraft purchase price against operational empty mass, 1995
(data source: Avmark).

12. Factors affecting DOCs

When the formulae given above are applied to an aircraft operating over a range of sector
distances it is found that the operating cost/seat mile varies enormously. This can be seen in
the lower part of Fig. 3a.4. The operating costs at low ranges are much higher than at long
range.


Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs


Figure 3a.4: Factors affecting DOCs.





Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

ADDITIONAL NOTES Lecture 3 Airline Costs

Dept. of Aerospace Engineering, University of Bristol AENG24630: Aircraft
Operations

13. Presentation of DOC comparisons

Very often one has to present a comparison of operating costs between different aircraft
operating over a given range. The important parameters for the airline are the cost to fly the
aircraft over the given sector and the cost per seat. The cost/sector has to be met no matter
how many passengers buy tickets, whilst the cost/seat reflects (for a given ticket price) the
potential profit.

Since each aircraft will, in general, have a different seating capacity, it is necessary to use a
presentation that will allow this effect to be taken into account. One such presentation is
shown in the top part of Fig. 3a.4. By taking one aircraft as a datum the cost/trip can be
expressed as a percentage of that aircraft cost and becomes the x-axis of the plot. Similarly
the cost/seat mile (with each aircraft flying full) can be expressed as a percentage and plotted
on the y-axis. To complete the picture, lines of constant seating capacity (iso-passengers;
or iso-payload for a freight aircraft) can be added showing how size affects the relative
comparison.

The airline may use this in several ways. For example, if faced with a choice between a 300
seat aircraft and a 250 seat aircraft with the same seat mile costs, the airline might choose the
250 seat aircraft because the trip costs would be 17% lower.