What Goes into Airline Route Decision Making?

Posted on Centerlines Blog on Oct. 17 by Liying Gu

Two presentations during today’s Finance Committee meeting aim to “demystify” airline’s decision making process in route planning.

According to a joint presentation made by Matthew Cornelius of MWAA and Patrick Heck of Denver Airport, airlines look at all costs when evaluating airport cost. Route profitability analysis is a result of the analysis made by three functional departments, i.e. strategy/planning, revenue management, and finance. The airport properties group, which is the group airport managers mostly familiar with, is not included in discussions on route profitability.

In a separate presentation, Garfield Eaton of Ricondo explained the three components of airline costs at an airport. The first component is the airline rates and charges which typically include terminal rents, federal inspection fees, baggage system fees, landing fees, gate/apron fees and RON fees. The second component is the airport cost paid directly by airlines which include terminal special facility debt, terminal operating and maintenance charges, both capital and operating & maintenance charges for loading bridges, deicing costs and baggage consortium fees. The third component is what is typically being ignored – airline operating & delay costs which encompass total aircraft taxi time costs, enroute delay and gate delay costs, baggage systems and mishandled baggage cost, and passenger ticketing and bag check cost. According to Eaton, this third component represents one of the largest airport costs to airlines. Factoring in airline operating and delay costs would allow comparison of “true” airport costs.