It’s a depressingly familiar headline for travel enthusiasts, as the cost of flying is on the rise again. According to the latest inflation figures from the Office for National Statistics, the cost of a typical airfare jumped some 30 per cent year-on-year this summer.
In fairness, number-crunchers have been quick to attribute much of that dramatic rise to the timing of the school holidays. But given the backdrop faced by airlines – not least the rising fuel costs and the push towards higher taxes on flying – a jump in prices should hardly be surprising.
Where exactly is your money going when you purchase a flight ticket? Let’s examine a return journey from Heathrow to JFK, the world’s busiest long-haul route. Looking at a typical economy fare for this November, you can expect to pay somewhere in the region of £350 – prior to bags and seat selection – if you’re travelling with one of the major carriers.
A breakdown of a real ticket (£357 with Virgin Atlantic, 10-17 Nov) provided by aviation analysts OAG shows exactly where that money goes. And it doesn’t make for a pretty picture.
Total spent so far: £0
The government’s coffers: £90
Of that £357, around one quarter (£90) goes straight to the Treasury in the form of Air Passenger Duty (APD). This is the rate for those flying to “Band B” countries (whose capital city sits 2,001 miles to 5,500 miles from London) in economy class. Those flying further afield must pay £94; the rate for short-haul flights is £13.
And further APD rises are coming. From April 2026, the short-haul levy will go from £13 to £15. For longer flights the rate will go up by £12 to either £102 to £106, depending on the distance, and the rate applied to domestic flights will rise by £1 to £8.
All these rates apply to the lowest class tickets or class of travel. If you book a premium economy or business-class seat, you have to pay double.
Heathrow’s fees: £51
A further 15 per cent (£51) of the airfare goes to Heathrow to cover its compulsory charges. So that’s around 40 per cent of the ticket price gone before the plane has even left the runway.
This figure also looks certain to rise. Heathrow is also in the midst of increasing its ground charges by around 14 per cent, much to the chagrin of airlines, to help fund a multi-billion pound overhaul of its core facilities by 2040. This would mean another £7 to pay.
The US government’s take: £55
Then there are the charges at the other end of the journey, with a barrage of fees levied by the US government. Add together all of the disparate customs and immigration fees on an economy ticket and you end up with another £55 that isn’t going to the airline. All of which leaves just £160 to pay for the costs of actually flying the plane.
Right now, there’s no indication that the US will hike its airport taxes, but that’s more than can be said for some other countries. France has just doubled its “solidarity tax” levied on short-haul flights as part of an attempt to rescue the public finances, while Canada’s new prime minister, Mark Carney, has suggested that flight taxes might rise. It all adds to a tricky picture for airlines, who aren’t swimming in profit, despite what you might think.
The good news from the airline’s perspective is that all of the above costs are the same regardless of the ticket price – at least for now. If passengers choose to fly at short notice and end up paying considerably more than £357 for their ticket, the airline effectively gets to pocket the difference.
Jet fuel: £53
According to OAG, a typical legacy carrier (i.e. British Airways, KLM, Virgin Atlantic) spends around one third of its money on fuel.
This could also increase, with analysts raising fears earlier this year that prolonged conflict in the Middle East could see fuel prices spike to levels not seen since the immediate wake of Russia’s invasion of Ukraine.
One of the most common ways that airlines can prepare for price volatility is to “hedge” their exposure to the markets by locking in a price well in advance. Given that markets can be volatile, the tactic isn’t entirely risk-free – and it also requires airlines to have enough cash to spend it up front – but it can help airlines avoid paying over the odds in times of strife.
Staffing costs: £32
Around one fifth of airline spending is on staffing costs, according to OAG, including salaries, recruitment and training. British Airways, for example, employs more than 40,000 people, from pilots and flight attendants to engineers and customer relations managers.
Pay for cabin crew is famously poor, with basic starting salaries in the region of £20,000, while pilots might earn £50,000 a year to begin with, rising to over £100,000 for an experienced captain.
Fleet and maintenance: £56
A quarter of airline spending is reserved for new planes and fleet upgrades, while maintenance amounts to another 10 per cent, says OAG.
Virgin Atlantic is in the midst of a $17 billion fleet overhaul, replacing older jets with 45 newer, more fuel-efficient aircraft by 2028, while earlier this year, IAG, the parent company of BA, ordered 71 new long-haul jets, including 32 Boeing 787-10s and 21 Airbus A330-900neos. List prices for the A330-900neo and 787-10 are about $374 million and $397 million, respectively, though airlines typically negotiate big discounts.
Sales and marketing: £8
Around five per cent of airline spending is on sales and marketing. Virgin Atlantic’s current strategy is very much focused on diversity, with its call to action “Be a Rainbow in the Clouds” inspired by the late civil rights activist Maya Angelou.
The airline’s profit? £12
You might wonder how much is left for profit. In truth, not much: IAG made around 14 per cent profits on £27.5 billion revenue last year – and they still need to pay corporation tax (headline rate: 25 per cent) on that.
Indeed when you account for passenger numbers, the global aviation body IATA estimates that the typical European airline makes just over £6 in post-tax profits from each ticket sold. On a £357 economy return from London to New York, that means less than 2 per cent of the fare is actually profit.
The picture for low-cost carriers isn’t much different. Take a Ryanair return ticket from Stansted to Budapest, which you can currently get for the rock-bottom price of around £50 on certain dates in November.
In theory, that ticket price needs to cover £13 in Air Passenger Duty, £30 for Stansted’s fees, and around £30 for the Hungarian tax authorities. Except of course it doesn’t: given that the actual ticket price comes to less than those three mandatory charges added together. To square that circle you need to factor in Ryanair’s wider business model.
By now, it’s no secret that the airline’s prices fluctuate rapidly with demand. While it’s easy enough to find a £50 return ticket, it’s just as common to end up paying three or four times that if you book during a busy period. Those passengers who do so are helping to subsidize their neighbors who bagged the cheaper prices.
Then there’s the other great revenue generator: ancillary fees. Looking at my bargain ticket to Budapest in November, it will currently cost £35 if I want to take a larger bag on board with me. Luckily for Ryanair, that’s enough to cover the remainder of those pesky taxes and airport fees, leaving them a whopping £11 to take care of their own overheads.
When you look at it that way, it’s a wonder that the airline makes much profit at all. According to Ryanair’s latest numbers, the company made pre-tax profits of £1.3 billion, having flown some 200 million passengers – which works out as just £6.50 per passenger.
What does it mean for the future of aviation? If nothing else, it would suggest that airlines probably aren’t bluffing when they say that higher charges might make certain routes unprofitable. As for the seemingly modest £2 rise on short-haul APD announced by Rachel Reeves last year – the first such rise in over a decade – you can see why airlines are nervous.
So, yes, don’t be surprised if your ticket works out marginally more expensive this autumn (and again after next April when that APD rise takes hold). But if it’s any consolation, the airline probably isn’t particularly happy about it either.
