The Aircraft and Route Duality Part 1: When the Fleet Condemns the Destination to Failure

In the aviation industry, the aircraft type determines the scale of costs, whilst the level of revenue is tied to the nature of the air route. When the balance between the two is disrupted, losses manifest at the route level, leaving fleet management decisions far removed from the circle of blame.

This analysis is the first of two articles examining the causes of losses at some of the airlines in the Gulf region. Whilst discussion typically centres on factors such as fuel costs or staff efficiency, a significant part of the problem lies elsewhere.

Revenues may be capable of covering these costs, yet when an air route incurs a loss, the blame is cast on the route itself; network planners point to its declining efficiency, and revenue managers attribute the cause to weak demand, culminating in a reduction of flights or the closure of the route. However, the true flaw hides behind a decision made years prior, in a different department, to select an inappropriate aircraft type.

Operating an unsuitable aircraft on a specific route subjects the airline to a double loss, represented by a higher cost per seat and lower revenues from it. Despite this, the loss appears at the route level, and fingers are rarely pointed at the fleet plan, which is the true culprit behind the losses. In reality, aircraft selection is the most critical decision for any route; it dictates the costs, whilst the route determines what achieves profitability.

Why Do Route Figures Mislead Us?

Airlines rely on two primary metrics to measure performance efficiency: Cost per Available Seat Kilometre (CASK), which represents the operational cost of a single seat, and Revenue per Available Seat Kilometre (RASK), which represents the returns generated by that seat.

When RASK exceeds the CASK level, the route achieves a profit, and when it fails to do so, it turns into a loss. At Emirates, for instance, the margin between them is exceedingly narrow, with RASK standing at approximately 8.2 US cents against a CASK of roughly 8.0 cents; hence, the alignment between aircraft type and the nature of the route marks the dividing line between profit and loss.

The figure that connects these two metrics is the break-even load factor; this is the occupancy rate, or the percentage of seats that must be sold on each flight, to cover costs and avoid a loss, calculated by dividing CASK by RASK.

This figure fluctuates depending on the aircraft type; larger aircraft distribute their fixed costs over a greater number of seats, which translates into a lower seat cost (CASK), but conversely, they dictate the need for a higher load factor to cover those costs.

Emirates, for example, aims to achieve a load factor exceeding 80 per cent across its network, currently hovering at nearly 78 per cent. When the airline operates a wide-body aircraft with a 300-seat capacity on a route where demand does not surpass 55 per cent of its capacity, the break-even point automatically rises to levels the local market cannot meet. Consequently, the verdict of loss on that route has already been passed even before the first ticket is sold.

The Aircraft Dictates the Minimum Costs

Four fundamental items dominate the cost structure of airlines, and the aircraft dictates most of them even prior to route selection:

First: fuel. This is the largest and most sensitive cost, representing between 35 and 48 per cent of operating costs. Modern engines consume 25 to 30 per cent less fuel per seat compared to the models they replaced. The disparity is at its peak when compared to the older generation of four-engine jumbo jets; an A350 consumes approximately half the fuel of an A380 for nearly the same payload. 

This is the clearest rationale for Emirates phasing out the double-decker in favour of the 777X and A350. Meanwhile, the 737 MAX consumes 14 to 20 per cent less fuel per seat than the previous 737 generation, granting flydubai an edge over competitors still relying on older narrow-body aircraft.

Second: maintenance. This is the item most susceptible to miscalculation in cost estimates. The cost of a single overhaul for a narrow-body aircraft engine in maintenance workshops ranges from 0.5 to 1.5 million dollars, surging to between 3 and 5 million dollars for twin-engine wide-body aircraft, whilst quadrupling for four-engine aircraft.

Excluding the fuel component, the Cost per Available Seat Kilometre (CASK) index has witnessed a continuous decline across most operators. Consequently, airlines possessing the most modern and advanced fleets should theoretically record the lowest levels of operational cost.

Third: fixed fees. These encompass ownership and insurance. 

Fourth: variable fees. These include airports, airspace, and crew, thereby completing the airline’s operational bill.

By amalgamating all these factors, we find the disparity in aircraft efficiency to be stark. When calculating the cost per seat hour, a Boeing 787-10 costs around $19.54 compared to approximately $35 for the older A330-200. This equates to bearing a cost penalty of up to 79 per cent simply for operating an unsuitable wide-body aircraft on a specific route.

Matching Gauge with Route

If cost draws the baseline of the equation, it is demand density that determines the appropriate size, or what is known in the aviation industry as ‘Gauge’, meaning the size of the aircraft that the route can fill.

High-traffic and trunk routes (such as Dubai–London or Abu Dhabi–Mumbai) enjoy a massive volume of demand sufficient to fill wide-body aircraft several times a day. Conversely, secondary routes with limited density lack this margin; there, specifically, a narrow-body aircraft with an 80 per cent load factor outperforms a wide-body aircraft with a load factor not exceeding 55 per cent, every single time without exception.

Accordingly, airlines must formulate a flexible and bespoke strategy for each individual route, abandoning unviable lines, alongside continuous review of the flight network to ascertain the size and capabilities of competitors; this ensures precise gauge management and preservation of the highest market share.

Long-range narrow-body aircraft have broadened the scope; the A321XLR now reaches destinations up to 8,700 km away, such as the direct link between Kuwait and Manchester—routes that previously necessitated the operation of wide-body aircraft.

In this context, Qatar Airways is planning to utilise A321neo aircraft in an all-economy configuration to support its regional growth, whilst Etihad Airways employs the A320 family to operate medium-haul routes that were formerly the exclusive preserve of larger aircraft.

Furthermore, Kuwait Airways’ transition from a wide-body fleet to narrow-body aircraft is considered a step in the right direction, particularly given that its routes rely heavily on point-to-point direct transit traffic.

The Air Cargo Factor:

Freight capacity tilts in favour of the Gulf region, as Dubai, Doha, and Abu Dhabi are ranked amongst the most active air cargo hubs globally. Wide-body aircraft earn real money in their bellies (cargo hold) on almost every long-haul flight. 

A Boeing 777-300ER carries between 20 to 23 tonnes of cargo; with average international yields ranging from $2.50 to $4.00 per kilo, this generates revenues between $50,000 and $90,000 per flight—enough to transform a route that appears marginal based on ticket prices alone into a profitable one. For this reason, Gulf airlines resist substituting wide-body aircraft with narrow-body ones even if passenger demand alone does not justify the seat count, and this is also why Qatar Airways’ 2025 order included approximately 34 Boeing 777-8 freighter aircraft alongside its passenger jets.

Having revealed the true culprit behind the air route losses at some Gulf airlines, we shall move on in the second article to shed light on the solutions adopted by airlines to rescue their routes and achieve profitability.