In the article, “What impact do lower fuel costs and other changes have on American Airline’s break-even point?” the author explains how airlines such as American Airline Group (AAL), United Continental Holdings, and Southwest Airlines recorded record profits in 2014. These record profits are caused by the decrease in the price of oil in recent years. Changes in the cost of airline operations can have a huge impact on the airline’s breakeven points- this includes the change in the price of oil. A 3% increase in airfare could impact the breakeven point by decreasing it. Since the selling price of tickets went up, the contribution margin per unit will go up, making the breakeven point per units decrease. The 18% decrease in the price per gallon of jet fuel is a variable cost per unit that would also result in the decrease of the airline’s breakeven point. The increase in the number of seats sold impacted the breakeven point because it was easier to reach the point since more people are buying seats. The increase in the total money spent on jet fuel would make the breakeven point increase since the airline is spending more but not making more profit. The increase in the cost of labor contracts would raise the breakeven point because the fixed cost would go up. All these impacts result in either increasing or decreasing the breakeven point of the airline.
Although the cost of jet fuel per gallon has decreased, airlines are spending more on jet fuel because they are buying more fuel than they did when the prices were higher. Jet fuel is a variable cost for an airline rather than a fixed or mixed cost. When flying a plane, there are various conditions that affect the fuel efficiency. For example, flying against a strong wind will decrease efficiency and use more fuel. The altitude and weather conditions will also affect the amount of fuel used. Overall most of these