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Calculating airline costs On a United flight from Chicago to White Plains, N.Y.

, I was astounded to learn from a colleague who worked for the airline that the flight was profitable even though there were less than 40 seats occupied on a 130-seat Boeing 737. My friend explained that the average fare on that route was always much higher than most other routes. High-level executives and a very affluent population that lived near the White Plains Airport frequent the route. This constituency was willing to pay a higher price for the convenience of White Plains, rather than driving to a New York city airport. (Related column: Is that fare fair?) As a result, United rarely discounts that route and happily flew a half-empty plane for many years until smaller regional jets took over the route. Similar markets where airlines are loath to discount because the market will bear a higher price are Fort Myers, Fla., and Martha's Vineyard and Nantucket, Mass. Airlines determine their route costs and profitability based on the cost of flying one passenger one mile. The formula: divide total operating costs by the number of total miles flown times the number of available seats. Thus, the cost per seat mile, or the cost to fly one passenger one mile when every seat is full, might range from 7.5 cents on a low-cost carrier like Southwest, to 11 or 12 cents on a network carrier like American, United or Northwest. This creates some interesting pricing situations. For a low-cost airline with an operating cost of eight cents per seat mile, the cost to fly a 120-seat airplane 1,000 miles would be $9,600. If that airline is able to fill 70% of the seats (84 seats) on a routine basis, then the cost for an average one-way airfare must be approximately $115 in order for the airline to break even. Sele cted Airl ines 200 2 Do mes tic Unit Cos ts (Op erati ng exp ense s

per avai labl e seat mile in cent s) Ran k Carrier 1st 2nd 3rd 4th Quar Quar Quar Quart ter ter ter er 27 18.5 15.8 13.3

1 American Eagle 21.3 20.8 2 3 4 5 6 7 8 9 10 US Airways Northwest United Midwest Express Continental Alaska American Delta Frontier

16.1 15.7 14.4 11.2 12 11.1 11.2 11.8

11.3 12.6 11.6 11.2 11.1

12.1 11.6 11.8 12.2 12.3 10.5 9.9 11.1 10

11.5 10.9

12.3 11.1 10.6 8.3 8.1 7.8 7.5 6.3

10.7 10.3 10.1 8.7 9.5 7.5 7.3 6.8 8.5 7.8 9 7.5 6.3 7.9 7.8 8.2 7.4 6.4

11 America West 12 13 14 Sou rce: Air Car rier Stat istic s: ATA South-west JetBlue

U.S . Dep art men t of Tra nsp orta tion But if another airline has an operating cost of 12 cents per seat mile, the operating cost for that flight would be $14,400. So if 70% of the seats are sold on this flight, the average one-way price would have to be $171 to break even. Obviously, airlines cannot afford to sell many round-trip flights for $200 when their cost to break even could be $340 or more. While a low-cost carrier can sell many round trips for $230 and some for $300 and make a decent profit, the high-cost carrier must sell some seats at $230 to compete, and then hope to sell many more seats at higher prices. That is why prices in markets that do not have low-cost competition are generally much higher as high-cost airlines try to make up their profit on these routes. Read previous columns Send David your feedback: David Grossman is a veteran business traveler and former airline industry executive. He writes a column every other week on topics of interest and concern to business travelers. Tell him what you think of his latest column by sending him an e-mail at Include your name, hometown and daytime phone number, and he may use your feedback in a future column.