How an airline makes money

Where the money comes from

Almost all of it is tickets. On top come extras (bags, seats, fare families), onboard and tax-free sales, cargo in the hold and, later, loyalty partners, charters, holidays and contracts.

Where it goes

• Per flight: fuel (the biggest line, often a quarter to a third of costs), airport and navigation fees, handling, catering, crew allowances, emissions.
• Every month: salaries, aircraft rent, overheads (the head office, IT, sales and insurance, which grow with the fleet), interest.
• Now and then: heavy maintenance checks, cabin refits, launch costs.

Monthly charges are booked on the 1st, so a week can look better than the month it belongs to. The dashboard's headline result covers 30 days for that reason.

The measures

• Load factor: the share of seats filled. Under about 70% usually means too many flights, too big an aircraft or fares too high.
• Yield: what a passenger pays per kilometre flown.
• RASK and CASK: revenue and cost per available seat-kilometre. An airline earns when RASK beats CASK.
• Contribution: a route's revenue less its flights' direct costs. Salaries, rent and overheads are paid either way, so a route with a positive contribution helps even before it covers them.

The Finance page has the full statement (EBITDAR, EBITDA, EBIT, net result), unit costs, payments due and the ledger.

Cash and borrowing

Cash is what keeps you alive. Finance shows the runway: how long the cash would last with no revenue at all.

• A credit line of 15% of the airline's assets, at 7% a year on what you draw.
• Loans against your assets.
• Sale and leaseback: sell an owned aircraft at market value and lease it back.
• The overdraft is automatic and costs 18% a year: avoid living there.

Corporate tax is 22% of monthly profit, once past losses are used up.

Going bust

Negative cash at a month's end (after salaries and rent) puts the airline into administration. Still negative at the next month's end, it is liquidated. You can found a new airline in the same world.

Fuel and hedging

The fuel price moves daily and follows the economy: a boom or a fuel shock holds it high for months, a recession low. A hedge fixes the price for part of a future month's fuel at today's forward price for a 1% premium. It pays when fuel ends up dearer than the hedge and costs when it ends up cheaper. A CFO tops hedges up on the 1st of each month if you leave it to them.