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Aircraft Variable Costs

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Definition:

Variable costs, like fixed costs, are important to determine when buying an airplane. While fixed costs are relatively obvious, variable costs can be somewhat more complex. Determining both fixed and variable costs ahead of time can offer insight for a potential buyer to determine if he or she can afford aircraft ownership.

Variable costs are defined as costs that vary with aircraft usage. As the aircraft usage increases, the variable cost will increase, too. The cost per unit stays the same. For example, the more an airplane flies, the higher the total fuel cost will be. Therefore, fuel is a variable cost.

Common examples of variable costs include:

  • Fuel
  • Oil
  • Landing Fees
  • Catering
  • Crew Expenses, such as travel, hotel and per diem when on trips
  • Crew salaries, if paid per flight hour. When crew members are paid hourly, the cost incurred is a variable cost. Many crew members are paid an annual salary, in which case the cost is considered a fixed cost.
  • Maintenance – most organizations consider all maintenance costs as variable costs. Some, however, consider certain aspects of aircraft maintenance as fixed costs. Annual inspections, for example, are typically scheduled and must be completed whether the airplane flies ten hours or a thousand hours per year, which leads some operators to consider this type of maintenance, as well as scheduled overhauls and avionics updates. These costs can be considered fixed costs since they don’t necessarily change with aircraft usage.

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