I think you’re confusing the quoted sentence and “I think airline tickets are expensive”.
It is more likely that he is ‘confusing’ the quoted sentence and the findings from analysis of business failures (and marginal successes) in the industry in question compared with other industries and various analyses about the market forces that produce that result. This is still not quite the same thing as “commercial aviation is just barely economically viable today” but far closer than “I think airline tickets are expensive”.
(I agree with Lumifer that Army’s conclusion does not follow. Tripling the cost of fuel would still result in a viable albeit far, far smaller commercial aviation market.)
The cost of fuel seems to account for about 20% of the cost of the ticket on a US domestic flight (source). Given that international flights have higher fees, I expect the fuel cost percentage to be even smaller for them.
For example I took a look at a New York—London return economy ticket which costs about $1050 now. Out of that amount $250 are government taxes and fees (NOT including the sales tax).
And yet airlines lost money for most of the past decade. So these 3 billion passengers aren’t paying them that much. (And I don’t think it just doesn’t occur to airlines to raise prices; presumably they wouldn’t get as many passengers if they did.) Even more recently, it looks like the average net profit per passenger (average, not marginal) is of the order of $5.
Which divided by 3 billion would be $5.77/passenger in 2010, $2.50/passenger in 2011, $2.03/passenger in 2012, $3.53/passenger in 2013, and $6/passenger in 2014. What did you think I meant by “of the order of $5”?
Yes, we agree on the numbers, we’re just throwing connotations at each other :-)
$5 is a small number so you’re pointing to this. $somebillions is a large number and I’m pointing to that.
I am still pretty sure commercial aviation is perfectly viable economically, it’s just that certain peculiarities of the business make it hard to make lots of money in it. However it’s not going anywhere and, say, doubling the fuel prices will not make it go away either.
There are no issues with economic viability of commercial aviation today. Consider what would happen were it to shut down.
I think you’re confusing the quoted sentence and “I think airline tickets are expensive”.
It is more likely that he is ‘confusing’ the quoted sentence and the findings from analysis of business failures (and marginal successes) in the industry in question compared with other industries and various analyses about the market forces that produce that result. This is still not quite the same thing as “commercial aviation is just barely economically viable today” but far closer than “I think airline tickets are expensive”.
(I agree with Lumifer that Army’s conclusion does not follow. Tripling the cost of fuel would still result in a viable albeit far, far smaller commercial aviation market.)
The cost of fuel seems to account for about 20% of the cost of the ticket on a US domestic flight (source). Given that international flights have higher fees, I expect the fuel cost percentage to be even smaller for them.
For example I took a look at a New York—London return economy ticket which costs about $1050 now. Out of that amount $250 are government taxes and fees (NOT including the sales tax).
I don’t; otherwise I just wouldn’t buy them. Where did you get that from my comment anyway?
But what I think is irrelevant. It’s the aggregate market demand that counts.
Let’s look at the aggregate market demand. The annual passenger total is about 3 billion people.
Doesn’t look “barely economically viable” to me. At all.
And yet airlines lost money for most of the past decade. So these 3 billion passengers aren’t paying them that much. (And I don’t think it just doesn’t occur to airlines to raise prices; presumably they wouldn’t get as many passengers if they did.) Even more recently, it looks like the average net profit per passenger (average, not marginal) is of the order of $5.
From the link in the parent post, about $600 billion.
Peanuts, I know.
From the link in the parent post, net profit for the last five years:
2010: $17.3 billion
2011: $7.5 billion
2012: $6.1 billion
2013 (est): $10.6 billion
2014 (fcast): $18.0 billion
Which divided by 3 billion would be $5.77/passenger in 2010, $2.50/passenger in 2011, $2.03/passenger in 2012, $3.53/passenger in 2013, and $6/passenger in 2014. What did you think I meant by “of the order of $5”?
Yes, we agree on the numbers, we’re just throwing connotations at each other :-)
$5 is a small number so you’re pointing to this. $somebillions is a large number and I’m pointing to that.
I am still pretty sure commercial aviation is perfectly viable economically, it’s just that certain peculiarities of the business make it hard to make lots of money in it. However it’s not going anywhere and, say, doubling the fuel prices will not make it go away either.
That has more to do with the fact that air travel is commoditized than the price of inputs.