Strikes, illness and bad weather have disrupted British air travel in recent years. And now, the Civil Aviation Authority, the industry regulator in the UK, has announced that it is raising air traffic control fees – apparently to alleviate these issues.
The airlines pay the fee to the National Air Traffic Services (Nats) for their air traffic control capabilities. The fee will rise from £47 to £64 per flight until 2027, representing an average increase of 43p per passenger to £2.08.
Must admit, admit. But the fare is one of many that make up the typical airline ticket, with fuel costs, government taxes and security fees all adding to the final price.
By law, all these unavoidable charges must be advertised as part of the ticket – meaning the price you see should be what you pay. But airlines have some discretion, and can charge additional variable amounts.
Air Passenger Duty
Some of them, however, are fixed. Air Passenger Duty was increased earlier this year, meaning the government charges economy passengers £13 each on short-haul flights. For long journeys the amount increases to £87, or £91 for journeys over 5,500 miles in length.
The rates for premium, business economy and first class passengers are much higher – the most expensive seats on the longest flights, for example, will be £601 APD. However, the changes earlier this year made domestic flights slightly cheaper, with the tax halved from £13 to £6.50 per passenger.
Then there is the fuel tax, often listed as a “Carrier Imposition Fee”. Airlines first introduced these in 2004, as the price of rocket oil rocketed to $40 (£22.32 in 2004) a barrel. This has stabilized, but some airlines still have the fee.
This year, IATA reports, fuel accounts for 28 percent of airline costs, although this has fluctuated wildly. In some countries, such as Australia, New Zealand and Hong Kong, the charge is closely regulated, meaning that the costs cannot be fully passed on to the customer.
This is not the case in the UK. Taking a British Airways flight from London to Barcelona as an example, the fare for UK travelers works out at just under three per cent of the ticket price. Some budget airlines, such as easyJet, do not include it in their fares.
However, there are no taxes on jet fuel in the UK for airlines themselves, unlike the fuel used by almost all other forms of transport. There is no VAT on plane tickets either (unless you are flying on a private jet).
That’s not all – journey-specific costs may also be included on your ticket. Passenger Service Charge covers what airports charge airlines for using their services. In the Barcelona example, that equates to £23.18 (or 16 per cent) of the final amount. This number, somewhat controversially, varies between airports. Earlier this year, Heathrow was forced to cut its landing fees from £31.57 per passenger to £25.43 from next year, after a year in a row.
As with many aspects of air travel, the breakdown of fares was also changed after 9/11. Insurance and security costs were cut after 2001 to account for the additional processes involved in flying, and again, these vary between airlines. These are more common on routes operated by US-based airlines, but UK airlines can charge them, according to IATA, if they are clearly labelled.
The “final charge”
Even after these charges, what is left is not total profit. Labor is estimated to account for about a third of an airline’s operating costs, which, along with fuel, is the largest overhead. Smaller fees, such as the Nats fee, are likely to be folded into the final “fee” on a ticket, rather than listed separately as taxes are.
Figures from the US Department of Transportation can be used to estimate the costs associated with each element of air travel. About two-thirds of the “final fee” is spent on crew and fuel. Leasing and owning an airplane eats into six percent of the ticket price; the same goes for non-aircraft assets such as hangars and offices. The cost of free refreshments, landing fees, maintenance, insurance and advertising all take a bit less. And these numbers don’t include government fees, which add more than £100, as the example ticket for BA flights to New York shows.
Of course, these figures are just looking at American airlines, and are averages, but they give an idea of how our ticket fees are spent over the mandatory fees.
As for the final profit? According to the International Air Transport Association, airlines are taking home an average of $4.36 (£3.60) per passenger in Europe, and $9.53 (£7.87) in the US. Worldwide, the average profit margin is $2.25 (£1.86) per passenger.
Ancillary profits are not included in this final amount. Additional costs, from seat fees to on-board sandwiches, make up a big wedge of money for airlines. In May, it was reported that Ryanair earns around £20 from the average passenger, mainly through smaller purchases such as seat reservations and snacks.
It is worth noting that the final price of tickets can also change. If the “unavoidable charges” are reduced by the government at any point after the purchase, there may be an option to claim a refund (although this, again, varies between operators).
Unfortunately, the opposite also applies: you “may be required” to meet the new amount if there is also a significant increase. Regardless, in the UK, the extra costs should always be advertised as part of the ticket price – so there shouldn’t be any surprises.