Aircraft Direct Operating Cost
Each airline generates its own in-house DOC computations, with variances in manhour rates and schedules. Although the ground rules for DOC vary among companies, the AEA standardization (1989; short-medium range) has been accepted as the basis for comparison. ATA rules are used in the United States.
The NASA report  provides American Airlines-generated economics. The NASA document proposed in 1978 is an analytical model associated with advanced technologies in aircraft design; however, it has yet to be accepted as a standard method for comparison. The AEA and ATA ground rules appear to have considered all pertinent points and have become the benchmarking and comparison standard for the operational and manufacturing industries. This book deals with AEAL ground rules.
Table 16.13 lists the breakdown of DOC components under two basic headings. The ownership cost elements depend on the aircraft acquisition cost.
The NRCs (i. e., design and development) of a project and the costs of aircraft manufacture contribute to the ownership-cost elements, whereas the cost of fuel, landing fees, and maintenance contribute to trip-cost elements. Once the aircraft has been purchased, ownership costs are incurred even when crews have been
hired but flight operations are not carried out. The crew cost added to the ownership cost results in the fixed-cost elements. The crew cost added to the trip cost is the running cost of the trip (i. e., mission sortie). Aircraft-price-dependent DOC contributions include depreciation, interest, insurance, and maintenance (airframe plus engine), with a total nearly three to four times higher than the fuel cost (year 2000 level); with increased fuel cost (year 2008 level) it has come to about two to three times. Crew salary and cost and navigational and landing charges are aircraft – weight-dependent, which is second-order aircraft-price dependent, but is based on manhour rates herein.
For the reason of high ownership cost contribution to DOC, the industry was driven to reduce manufacturing costs and the demand was as high as a 25% cost reduction. Clearly, the design philosophy is significant in facilitating manufacturing cost reductions. One consideration was to relax certain quality issues (see  and Chapter 17), sacrificing aerodynamic and structural considerations without sacrificing safety. However, when the price of fuel rises, consideration for such a driver would be affected. Fuel price already increased siginficantly in 2008; any further increase would require drastic measures because the return from pure aerodynamic cleanliness at a high investment level may not be sufficient. These are important considerations during the conceptual design stage. RD&D efforts sometimes seem to look to the future through a crystal ball. There are diminishing returns on investment for aerodynamic gains. Fuel prices fluctuate severely and efforts to invest in reduced drag could move slowly until the situation stabilizes. A parallel effort to use less expensive alternative biofuels is underway, and the demand for a turboprop operation is a reality.
Figure 16.6 shows the DOC components of a midsize-class aircraft. For an average midrange sector, the midsize aircraft cost contribution to the aircraft DOC is three to four times higher than the contribution of the cost of fuel (2000 prices).
The passenger load factor (LF) is defined as the ratio of occupied seats to the total number of seats available. Typically, an airline prefers the sector DOC to break even at approximately one third full (i. e., a LF of 0.33, or 33%); due to recent fuel price increases, the figure has increased to about half full. Revenue earned from passengers carried above the break-even LF is profit. Although some flights can operate at 100% LF, the yearly average for a high-demand route may be much lower. Passenger accommodations can be either in different classes with fare-structure tiers or
in one class, decided by the airline. Even in the same class, airfare can vary depending on different promotions. Among airlines, the break-even LF varies: with deregulated airfares, ticket prices can vary by the hour depending on passenger demand. The standard fare is the ceiling fare of the class and it offers better privileges.