Air Freight Costs

Goals

To understand the cost structure of air freight and the operational cost-per-kg in current services such as DHL, UPS, USPS.

Early Findings

COST STRUCTURE

  • According to a World Bank report, the average unit cost per ton kilometer for air freight depends on the type of operation, the load factor, and the route.

Type of Operation

  • All cargo carriers include capital and direct operational expenses in the calculation for cost per unit.
  • Capital expenses include rental fees for leased aircraft and depreciation and ammortization for owned aircraft.
  • Direct operating costs include fuel, maintenance, crew, insurance.
  • Other fees included in costs are airport and navigation fees, ground handling charges, and airline administration.
  • Costs can vary depending on whether the flight is chartered or scheduled.

Route

  • Due to the time spent loading and unloading air freighters, most can only perform two flights per day. This limits the aircraft to about 2000 hours or less for shorter, domestic operations and 4000 hours or less for longer intercontinental routes.
  • This results in a variation of unit costs per freight ton-km associated with the crew and capital expenses.
  • The route also affects the cost of fuel per kilometer "because of the fuel consumed per trip for taxiing, climbing, descending and waiting in holding patterns."

Load Factor

  • The load factor of an aircraft is important in determining price per unit because fuel cosumption is impacted by the weight of the plane.
  • The load factor is the ratio of an aircraft's lift to its weight. The average load factor for cargo planes is about 42% as of 2018.

Average Operational Cost per Aircraft

  • The average operational cost per aircraft is calculated by dividing the capital costs plus direct operational costs by the number of hours of aircraft operation (called block hours).
  • The most recent publicly available data reports that the average operational cost per aircraft in the air cargo industry is about $25,800 per block hour.


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