Discussion of Fuel Costs on airline operations [split from Ask the Pilot thread]

[Melburnian1]

Earlier in this thread there were figures given for typical hourly fuel consumption in kilograms of an A388 or B744.

For an 'average' flying day with typical headwinds in this direction, what would be the typical number of litres that (say) QF9 from MEL to DXB and then DXB to LHR would consume if the plane was fully loaded to its maximum take off weight with 484 passengers, luggage and whatever space remained for freight?

My guess would be roughly 250,000 litres but I welcome the facts rather than a back of the envelope guess. For the purposes of the exercise, let's assume no holding patterns or go-arounds at either DXB or LHR and relatively quick takeoffs at both MEL and DXB.

While oil prices constantly rise and fall, what is a typical price per litre in $A that QF and other airlines might pay at either MEL, SYD, DXB or LHR presently (perhaps expressed per barrel, which as a US measurement is 119 litres)? Let's assume that prices are constant for all major international airlines, though if I recall some time ago QF or others claimed that EK and other Middle Eastern airlines enjoy a subsidy on fuel unavailable to Western airlines.

 

[jb747]

Re: Ask The Pilot

My guess would be roughly 250,000 litres but I welcome the facts rather than a back of the envelope guess. For the purposes of the exercise, let's assume no holding patterns or go-arounds at either DXB or LHR and relatively quick takeoffs at both MEL and DXB.

While oil prices constantly rise and fall, what is a typical price per litre in $A that QF and other airlines might pay at either MEL, SYD, DXB or LHR presently (perhaps expressed per barrel, which as a US measurement is 119 litres)?

Your number is close enough. BTW, we use kilos, not litres. I care what it weighs, not how much volume it takes.

We aren't privy to the actual price. But I'd guess at it having the same relationship to the wholesale Singapore price as does fuel at the service station.

Jet Fuel - Monthly Price (Singapore Dollar per Gallon) - Commodity Prices - Price Charts, Data, and News - IndexMundi

Let's assume that prices are constant for all major international airlines, though if I recall some time ago QF or others claimed that EK and other Middle Eastern airlines enjoy a subsidy on fuel unavailable to Western airlines.

Why assume that? I presume you're also going to assume they all pay the same tax rates, and depreciation rates. As soon as assumption comes into play, all comparison is invalid.

 

[Melburnian1]

Re: Ask The Pilot

jb747's confirmation that a fully laden A388 between MEL and LHR with a stopover at DXB might consume 300,000kg (roughly at a 15 degree temperature 250,000 litres) of fuel which is about A$225,000 in cost at A$0.90 per litre shows just how razor thin the margins are on longer distance air routes with significant competition such as the (albeit altered from traditional via SIN to via DXB, at least by EK and QF) Kangaroo Route (or various incantations such as 'Canton Route' ascribed by competitors such as CZ).

QF's passenger revenue of about $720,000 for a flight operating at the typical 86 per cent load factor that BITRE states occurred in 2012 on the QF LHR routes (assuming average one way revenue for a whY seat A$1000; PE $2700; J $4000 and C $6500) can be bumped up by freight, and also by higher yields because some passengers deplane in DXB while others join, so there's a 'flagfall' in the fare structure for that.

When one considers financing costs (even for income foregone by use of the capital, at perhaps A$80,000 per day); staffing costs for two shifts (one a long one to DXB that makes a significant dent in the maximum number of hours per month that the flight crew can fly) of 48 flight and cabin crew in total; insurance; check in staff totalling perhaps 20 shifts in the three locations (bearing in mind that in DXB they'll be checking in passengers for LHR for two flights, one ex SYD, the other ex MEL); baggage handlers at three airports; depreciation of airport based equipment such as robots/ tugs; an allowance for head office costs (executives plus the many support staff) and the capital and operating costs of airport lounges (FF business is however profitable); stabling costs on the airport hardstand during the day at LHR while the A388 has its layover; travel agent and Internet commissions and sundry other costs (IT equipment at check in counters, even down to printing boarding passes if passengers do not print their own) and an allowance for maintenance costs including staff employed for those fundamental and safety critical tasks, it is apparent that there may not be a lot left for shareholders.

No wonder many investors have a golden rule to avoid airlines and insurance companies!

 

[cove]

Re: Ask The Pilot

Do not ever dream that Emirates is making lots of profits out of their larger size. The last report I read was a minor profit compared to the size and risks they are taking.
High fuel prices dwarf most of the other running costs.

 

[Boris spatsky]

Re: Ask The Pilot

And whilst fuel might be 90 cents a litre elsewhere, if you fill up with AVTUR in Oz they will hit you with $1.98-$2.06 at present a litre (unless the airline fuel hedges). That is a big difference.

 

[Melburnian1]

Re: Ask The Pilot

So Boris, bearing in mind that the actual amount of fuel carried on each sector is one for the captain and that the price may vary between airports (and perhaps even suppliers a bit), what is your estimate as to how much the 250,000 or so litres of fuel noted above is going to cost QF given the recent decline in the $A if you believe that I have underestimated its cost?

True, QF and others normally hedge some or most of their fuel costs, although this year old article does not endorse that, claiming that hedging is an expensive and risky strategy:

Slow learners at Qantas

 

[Boris spatsky]

Re: Ask The Pilot

So Boris, bearing in mind that the actual amount of fuel carried on each sector is one for the captain and that the price may vary between airports (and perhaps even suppliers a bit), what is your estimate as to how much the 250,000 or so litres of fuel noted above is going to cost QF given the recent decline in the $A if you believe that I have underestimated its cost?

True, QF and others normally hedge some or most of their fuel costs, although this year old article does not endorse that, claiming that hedging is an expensive and risky strategy:

Slow learners at Qantas

No idea, because i am not familiar with how much discount the larger operators get from the fuel companies. I do know that some of the regionals pay the price i quoted, which makes for an expensive business.

 

[Wannabee]

Re: Ask The Pilot

300,000kg (roughly at a 15 degree temperature 250,000 !

1 L of Jet A1 weighs around 0.8 kg 300,000 kg would be 375,000L or 250,000 L would be 200,000 kg

 

[nlagalle]

Re: Ask The Pilot

jb747's confirmation that a fully laden A388 between MEL and LHR with a stopover at DXB might consume 300,000kg (roughly at a 15 degree temperature 250,000 litres) of fuel which is about A$225,000

The temperature doesn't alter the weight of the fuel. the weight per litre is on the post above.

 

[Wannabee]

Re: Ask The Pilot

The temperature doesn't alter the weight of the fuel. the weight per litre is on the post above.

The SG does vary with temperature amongst other things. Doesn't make any real difference for the quantities I use (900L)

 

[nlagalle]

Re: Ask The Pilot

The SG does vary with temperature amongst other things. Doesn't make any real difference for the quantities I use (900L)

true.. It was never factored in my calculations (but i wasn't using tonnes of fuel either).

 

[Must...Fly!]

Re: Ask The Pilot

Why assume that? I presume you're also going to assume they all pay the same tax rates, and depreciation rates. As soon as assumption comes into play, all comparison is invalid.

Assumption is the mother of all screw ups after all.

I do, however, recall reading somewhere that EK paid the same as everyone else at DXB for fuel and that it is no co-incidence they run a double daily A380 to Jeddah, year round. What I read may be wrong of course but Saudi Arabia being what it is oil wise, I can see the reasoning behind the statement.

Of course it helps to make money (or not lose it) when you have no or very minimal cost of capital. And then because of that you can scale aircraft orders to obtain huge list price discounts. And that is before we get in to tax and depreciation as JB mentioned.

 

[harvyk]

http://www.australianfrequentflyer.com.au/community/your-questions/discussion-fuel-co

Might I suggest that the last couple of pages don't belong in this thread....

JB Just out of interest with the last couple of pages, are pilots ever truly privy to the prices of things? Also if pilots are not truly privy to the prices, could it ever be counter-intuitive if pilots are aware of the price of things for example if a pilot knows a go around cost $4,000 for instance, could that mean the pilot becomes a bit more adverse to doing go-arounds?

 

[jb747]

Re: http://www.australianfrequentflyer.com.au/community/your-questions/discussion-fue

JB Just out of interest with the last couple of pages, are pilots ever truly privy to the prices of things? Also if pilots are not truly privy to the prices, could it ever be counter-intuitive if pilots are aware of the price of things for example if a pilot knows a go around cost $4,000 for instance, could that mean the pilot becomes a bit more adverse to doing go-arounds?

There is a theory to the effect that pilots knowing the price leads to dollar based decisions, and so reduces safety. For instance, is there any reason to tell me how much that 3 tonnes extra I want costs? Where operational decisions are concerned, the cost is irrelevant. You either need something, or you don't.

Somewhere in these pages, we've probably discussed the subtle pressures that are exerted, probably by most airlines. Little things like countdown timers on gates, which, whilst it can be claimed are there to 'helpfully' tell you how much time you have left for an on time departure, can also have the effect of causing people to rush...and rushing is bad. Bigger items exist too. Have a look on the net at the Ryanair crewing structure. It's nothing but a form of intimidation, and not a mild one either.

Realistically, a pilot shouldn't care at all what a go around costs. I certainly don't. But, we've also been discussing my dislike of what amounts to 'instant' pilots, and I think they're especially susceptible to this sort of pressure. You should never have to explain to anyone why you did a go around, or why you put x fuel on board...the act of asking, or setting up a system wanting an explanation, is simply another form of intimidation.

 

[samh004]

Re: http://www.australianfrequentflyer.com.au/community/your-questions/discussion-fue

There is a theory to the effect that pilots knowing the price leads to dollar based decisions, and so reduces safety. For instance, is there any reason to tell me how much that 3 tonnes extra I want costs? Where operational decisions are concerned, the cost is irrelevant. You either need something, or you don't.

But it's not your money. While I get that you might be alarmed how much a simple decision could cost, unless you knew your airline was suffering financially, knowing the cost shouldn't be an issue as you should be detached from that side of the business sufficiently. Though maybe I'm channeling my detachment to things there.

Conversely though, management could look at those same numbers to work out which pilot costs less to use on average, which might influence their decision to who to roster, which mightn't be a good thing. Though not saying a pilot/crew that somehow costs less fuel is more dangerous, but it'd be a "safety" issue.

Probably over thinking things as always.

 

[nlagalle]

Re: http://www.australianfrequentflyer.com.au/community/your-questions/discussion-fue

Conversely though, management could look at those same numbers to work out which pilot costs less to use on average, which might influence their decision to who to roster, which mightn't be a good thing. Though not saying a pilot/crew that somehow costs less fuel is more dangerous, but it'd be a "safety" issue.

Which leads bad to my original thinking, don't let accountants run business operations!

 

[codash1099]

Re: http://www.australianfrequentflyer.com.au/community/your-questions/discussion-fue

Which leads bad to my original thinking, don't let accountants run business operations!

...or anything else :mrgreen: