U.S MRO Unit Costs Up In 2017, Especially For Network Carriers.jpg Southwest Airlines

U.S MRO Unit Costs Up In 2017, Especially For Network Carriers

Long-term trend in real costs still downward, FAA data finds.

After all the talk about data, analytics and outsourcing strategy, a maintenance manager’s bottom lines are three: safety, technical dispatch reliability and unit costs. Safety has been excellent in recent years, we lack figures on reliability, but FAA data on unit costs are revealing. Long-term trends count, but so do short-term cycles and specific airline choices.

Total maintenance cost per available seat mile for a dozen top U.S. passenger airlines averaged 1.2 cents in 2017, up 3% from the year prior. The increase was generally greatest for network airlines, with American Airlines reporting 1.5 cents per ASM, up 6% from 2016, United Airlines 1.3 cents, up 5%, and Delta Air Lines a more modest 1.1 cents, up 3%, all according to FAA Form 41.

The four top low-cost carriers (LCCs) averaged 1.0 cents per ASM for their mostly narrowbody fleets, a 3% decline from the previous year. Southwest was right in the middle, with 1.0 cents, down 8% from its 2016 costs. JetBlue Airways with its mix of A320-family and ERJ aircraft was higher at 1.4 cents, up 8% from the prior year.

Lean and growing ULCCs Spirit and Allegiant both registered declines in unit costs of 2% and 4 % respectively. Alaska Airlines clocked in at 0.9 cents, up 11% from 2016.

The increase in network costs makes sense at this stage of the growth cycle, with steady increases in traffic keeping older, maintenance-hungry jets in the fleet. The major airlines have also been spending money on cabin upgrades, for example for inflight connectivity. This is not really maintenance but tends to get counted as such.

LCCs and ULCCs generally have younger, faster-growing fleets and have been a little less eager to spend on upgrades.

Despite the cyclical boost in short-term costs, long-term trends have been more favorable. Adjusted for general inflation, average per-ASM costs for the ten airlines (including their predecessors) declined 4% in the 22 years from 1995 through 2017. Increases in labor and part costs were offset by new aircraft that required less maintenance, by smarter ways of doing maintenance and probably by some scale economies in up-gauged aircraft. The hope is that this long-term trend will continue with the new generation of jets.

Southwest, continually flying some version or another of the Boeing 737, trimmed its real unit costs 9% over these two decades. And the network airlines, often under intense competitive pressures from LCCs, cut real unit costs an average of 15% over the same period.

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