Airline Industry Essay

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The current expenses and costs of running an airline Essie Kelly, Sherry Johnson, Lisa Jones, Wendy Murillo TLMT311 Dr. Onwuatuegwu Echezona 2 March 1, 2014 In this paper we will be discussing the expenses and costs that face the airline industry today. We will also be evaluation the current fuel costs and how they affect ticket prices and how often passengers will fly. For the first part, we will show Four different types of expenses and costs facing the airline industry. The first expense is the cost of the plane. Second is the price of fuel. Third cost is the hiring qualified pilots. Fourth is the airport fee. For the second part of this paper, we will be looking at how the fuel cost affects the cost of the ticket and the reason behind how often passengers fly and what airline they chose. Running an airline is unavoidable expensive. One of the most basic costs is the price of buying the airplanes themselves. (Boeing, 2014) For instance, a Boeing 737, a relatively small passenger jet, costs around $50 million or more. The larger jets can approach $300 Million in price. (Boeing, 2014) Fuel costs not only take a huge chunk out of an airline’s revenue, they are notoriously volatile. From month to month, airlines never know exactly how much fuel is going to cost. (Grabianowski, 2014) One of the most important ways for an airline to save money is through fuel hedging. What is hedging? It's a gamble against the future price of jet fuel. If an airline thinks that the cost of fuel is going to rise in the future, they can sign contracts locking in the current price for months or even years. If fuel prices double in 12 months, the airline would be buying fuel at last year's cheaper rate. However, if prices drop, the airline is stuck paying their "locked in" higher rate. (Grabianowski, 2014) Hiring qualified pilots to fly the planes is

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