Staff Travel

1
Staff Travel

• the real cost
• John Powell
• PBA 2006, San Juan

2
Whats an incremental cost?

• Any cost directly attributable to (or caused by)
  a specific element

3
When do non-rev incremental expenses occur?

• Before the flight
• During the flight
• After the flight

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Before the flight

• Reservations
• Phone time
• Phone system expenses
• Computer hardware costs
• CRS fees
• Agent time
• Staff Travel Office
• Facilities
• Staff
• Administrative Expenses

5
Reservations Phone Time

• Average calls per passenger
• Total annual res calls / total passenger count
  (revenue and non-revenue)
• Average length of call
• Total annual call minutes / total annual calls
• Cost per non-rev
• (Average Length of call Average calls per
  non-rev) 800 line cost / min

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Reservations Phone Time

• Assumptions
• Total calls per year 30 million
• Total annual call minutes 150 million
• Total annual passengers 10 million
• Cost per minute for 800 line 0.05
• Average calls per pax 30 million calls / 10
  million pax 3
• Average minutes per call 150 million minutes /
  30 million calls 5
• Cost per non-rev (3 calls 5 minutes) 0.05
  per minute 0.75

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ReservationsAgent Time

• Total Man Hours
• ((Average length of call Average calls per
  non-rev) Total non-revs)
• / 60 minutes
• Headcount required for non-rev calls
• (Total man hours / 52 weeks) / 40 hours per week
• Total agent costs to handle non-rev calls
• Headcount Average fully allocated annual salary
  for a reservations agent
• Reservations Agent Cost per non-rev
• Total agent costs / total annual non-revs

8
ReservationsAgent Time

• Assumptions
• Average calls per non-rev 3
• Average length of call 5
• Total annual non-revs 10,000
• Average res agent salary 30,000
• Man hours ((3 calls per pax 5 minutes)
  10,000 non-revs) / 60 minutes 2,500
• Headcount (2,500 man hours / 52 weeks) / 40
  hours per week 1.2 (round to 1)
• Cost per non-rev (1 agent 30,000 salary) /
  10,000 non-revs 3

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ReservationsPhone System Expenses

• Determine the following
• Do you have phones specifically dedicated to
  non-rev calls?
• If not, has the additional call volume from
  non-revs required additional phone equipment?
• Phone System Costs
• Annual maintenance and replacement cost per
  dedicated or incremental unit / total annual
  non-revs

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ReservationsPhone System Expenses

• Assumptions
• Dedicated phones 2
• Annual cost per unit 200
• Total annual non-revs 10,000
• Cost per non-rev (2 phones 200 per phone)
  /10,000 non-revs 0.04

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ReservationsComputer Hardware Costs

• Determine the following
• Do you have computers specifically dedicated to
  staff travel?
• If not, has the additional call volume from
  non-revs required additional computer equipment?
• Computer Hardware Costs
• Annual maintenance and replacement cost per
  dedicated or incremental unit / total annual
  non-revs

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ReservationsComputer Hardware Costs

• Assumptions
• Dedicated computers 2
• Annual cost per unit 1,500
• Total annual non-revs 10,000
• Cost per non-rev (2 computers 1,500 per
  unit) / 10,000 non-revs 0.30

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ReservationsCRS Fees

• Verify the following information from your IT
  Department
• What does your CRS charge for a new PNR?
• Does your CRS charge for changes?
• How much?
• What are the average number of changes per PNR?
• CRS cost per non-rev
• New PNR charge (cost per change average
  changes)

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ReservationsCRS Fees

• Assumptions
• New PNR 2
• Cost per change 0.50
• Average changes per pax 2
• Cost per non-rev 2 new PNR (0.50 change 2
  changes) 3

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Staff Travel OfficeFacilities

• Determine the following
• Is there any real estate dedicated to staff
  travel employees that has ongoing rent and/or
  maintenance costs?
• Would these facilities still be rented if there
  was no staff travel office?
• Facilities costs per non-rev
• Annual rent and maintenance costs for dedicated
  facilities / total non-revs

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Staff Travel OfficeStaff and Administration

• Staff expenses per non-rev
• Fully allocated annual salaries of dedicated
  staff / total annual non-revs
• Administrative expenses
• Computer hardware and maintenance
• Phone hardware and maintenance
• Phone line and call expenses
• Office Supplies

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Staff Travel Office

• Staff Travel Office expenses per non-rev
• (Staff salaries Facilities Administrative) /
  total annual non-revs

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Staff Travel Office

• Assumptions
• Facilities rent / maintenance (annual) 10,000
• Computer hardware and maintenance 3,000
• Phone hardware and maintenance 500
• Phone line and call expenses 2,000
• Office Supplies 500
• Fully allocated staff salaries 75,000
• Total annual non-revs 10,000
• Cost per non-rev (10,000 facilities 6,000
  administration 75,000 staff salaries) / 10,000
  non-revs 9.10

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During the flight

• Airport
• Agents?
• No. Non-revs are handled by existing staff
• Baggage Costs?
• No. The weight of the baggage is already
  included in the average passenger weight.
  Non-rev baggage is handled by existing staff and
  systems. If your airline mis-handles the bag,
  its not the non-revs fault)
• Facilities?
• No. There are no airport facilities leased
  specifically for non-revs.

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During the flight

• Onboard
• Crew member costs?
• No. Crew costs are determined by the aircraft
  type and are not incremental to non-revs.
• Aircraft rent / maintenance?
• No. If your company has acquired aircraft
  specifically for non-revs, enjoy the generosity,
  but polish your resume. Youll need it soon.
• Fuel?
• Yes
• Meals?
• Yes
• Landing Fees?
• No. Landing fees are a flat rate per aircraft
  type.

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Aircraft Fuel

• Gather the following information from your
  Operations Department
• Average passenger weight (including baggage) used
  for weight balance calculations
• Average additional fuel burn per hour per
  additional pound on the aircraft
• Average annualized cost per gallon of fuel

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Aircraft Fuel

• Assumptions
• Average pax weight 200 lbs
• Extra fuel burn per pound per hour 0.01 gallons
• Planned cost per gallon 2
• Formula
• Pax weight (Extra fuel Cost/gallon)
• 200 lbs ( 0.01 gallons 2)
• 4 / block hour

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Meals

• How does your airline determine its meal services
  for each class of service (First / Business /
  Coach)? Is it length of haul? Region? A
  combination?
• For example
• Domestic short haul
• Domestic long haul
• International
• Trans-oceanic / Inter-continental
• Ultra-long haul

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Meals

• Obtain from your Dining Services Department the
  food and beverage cost per passenger for each
  class by region based on standard meal services.
  Exclude delivery charges (which are generally the
  costliest part of the meal). Delivery is a flat
  rate and does not vary with the addition of
  non-revs.

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Meals

• Determine the routing within each pass travel
  region that would have the most costly meal
  service by class

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Meals
Zone 1 Domestic
Zone 2 Europe
BOS
LHR
NYC
CDG
8
20
8
25
5
LAX
5
MSY

• The costliest option for each zone would be
• Within Zone 1 LAX - MSY BOS 10
• Zone 1 to Zone 2 LAX NYC CDG 28

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After the flight

• Aircraft Cleaning?
• No. Even sloppy non-revs dont change the cost
  per aircraft for cleaning.
• Accounting?
• Yes

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Staff Travel Accounting

• Obtain from your Revenue Accounting department
  the per-transaction fee for processing an
  interline billing. This will be the same for
  both revenue and non-rev pax.

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Staff Travel Accounting

• Accounting Staff Costs
• Transactions per hour per accounting clerk
• (60 minutes / Average time to process one
  interline transaction )
• Accounting cost per non-rev
• (Average fully allocated hourly wage per clerk /
• Average transactions per hour) Transaction
  processing cost

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Staff Travel Accounting

• Assumptions
• Transaction processing time 3 minutes
• Full allocated hourly wage per clerk 15.00
• Transaction processing fee 0.25
• Transactions per hour (60 minutes / 3 minutes)
  20
• Cost per transaction (15 per hour / 20
  transactions) 0.25 transaction processing fee
• 1 per non-rev

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Itinerary vs. Directional Costs

• Itinerary costs are one-time incremental costs
  applied to a PNR regardless of length of haul,
  number of segments, one way or roundtrip
• Reservations
• Staff Travel Office
• Staff Travel Accounting
• Directional costs are cumulative based on length
  of haul
• Fuel
• Meals

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Itinerary Costs

• Reservations
• Phone time 0.75
• Agent time 3.00
• Phone system 0.04
• Computer hardware 0.30
• CRS fees 3.00
• Staff Travel Office 9.10
• Staff Travel Accounting 1.00
• Total Itinerary Costs 17 (rounded)

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Directional Variable Costs

• Fuel Meals One Way Roundtrip
• Within Zone 1 (6 hours) 24 10 34 68
• Between Zone 1-2 (13 hours) 52 28 80 160

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Total Costs

• Fixed Variable
• One Way Roundtrip
• Within Zone 1
• 1734 51 1768 85
• Between Zones 12
• 1780 97 17160 177

Note All dollar values used in this
presentation are hypothetical for demonstration
purposes only, and do not represent true costs at
any airline
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Questions ?