Airport Cost: Here's How It Really Works ....

 

In our recent post about the slight downward trend in fares Jason Blevins offered this on Facebook:

“You (the airport) have a direct influence in fare rates. Your contracted landing fees and SKY HIGH fuel rates drive up the costs.” 

Here’s how it really works. Let’s start with fuel. The airport does not sell fuel to the airlines. Each airline has its own contract with the oil company.

As for landing fees, that assertion is off base too...

The airport/airline business has a metric called “cost per enplanement.” That’s CPE for short.

CPE is the cost to the airline, at a given airport, for every passenger who gets on a plane. CPE includes landing fees, and the lease cost airlines pay for facilities at the airport.

In April the CPE at the Springfield airport was $5.70 per passenger. In 2012 a report by Moody’s Investment Services stated that the average CPE nationwide was $7.76.

Keep in mind that the Moody’s number is an average. At some airports it's much higher. Want to see for yourself? Click here to take the Google search for a CPE spin ....

You’ll find in places like Miami International the CPE was $20.39 in 2013. Cleveland: $15.37 in 2013. Dallas: $6.74 in 2012.

If you’d like to talk just about landing fees, the current landing fee at Springfield is $1.30 per thousand pounds. 

Click here to check out this St. Louis Post-Dispatch story from 2011 on landing fees in St. Louis...

What you'll find in the story: in 2011 the landing fee at St. Louis was $8.96. Kansas City: $1.96.

I know a lot of you are scratching your head at this point. If CPE is lower in Springfield, why aren’t fares lower? As a matter of principle, most airports, including ours, do everything they can to keep cost low. But in the final analysis CPE doesn't have much to do with fares.

Don’t take my word for it. Check out this story from January in the Dallas Morning News...

Please note the paper's quote from the chairman of American Airlines, Doug Parker: “What we believe is that pricing is tied to demand… and that’s what we should base our pricing on and not based on our cost structure.”

The newspaper reporter put it more succinctly: "On their earnings call Tuesday, American Airlines executives said that demand, not costs, determines what they charge for fares."
 

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