Arkia CEO Claims $1,200 New York Flights Leave Airlines With Zero Profit
Arkia CEO Oz Berlovitz revealed that a $1,200 economy ticket to New York leaves airlines with virtually zero profit amid soaring fuel costs, relying instead on business class and cargo.
A $1,200 flight ticket to New York might sound like a significant revenue stream for an airline, but according to Arkia CEO Oz Berlovitz, under current conditions that amount can leave the company with virtually no real profit per passenger.
In an interview with the "Bulldog" podcast, Berlovitz discussed the economics behind operating flights and revenue sources on long-haul routes.
Fuel Costs and Zero Profit Margins
The interviewer presented a scenario where every passenger on a plane to New York paid $1,200, and asked how much of that sum ultimately remains in the airline's hands. Before reaching the bottom line, Berlovitz was also asked about the standard occupancy rate on the plane, to which he replied: "85%."
Yet the ticket price alone is far from determining how much the company will profit from the flight. Berlovitz pointed to one of the main variables in the calculation: "The most influential factor is the fuel price. Do you know what the fuel price is today? $488 per gallon 1."
When asked to translate the data into the profit margin from a passenger who paid $1,200, his answer was sharp: "At $1,200, you are around zero."
Business Class and Cargo Revenue
According to Arkia's CEO, the picture changes when looking at additional revenue sources on long-haul flights. One of the most significant is passengers who pay much higher sums for business class seats.
"What do airlines enjoy on long-haul routes? Business passengers who pay for 20 seats or 30 seats, $2,000 to $3,000 or $4,000, and the amount of cargo they bring," Berlovitz said.
Alongside business passengers, cargo flown in the belly of the aircraft generates another revenue source. When asked what share it constitutes of total revenue, Berlovitz replied: "5%." The interviewer wondered if it is only 5% in total, to which Berlovitz responded: "Even less."
Cargo income is also not fixed and may vary depending on the quantity offered and market conditions. Berlovitz illustrated this through the gap between prices charged at the beginning of the war and current prices:
"The more you fly, the lower it goes. You remember that at the beginning of the war, when no airline flew here, they sold a kilogram of cargo for $5, today it is less than a dollar."
Industry Pushback
Berlovitz's remarks illustrate the revenue structure supporting airlines on long-haul routes: alongside the ticket paid by the regular passenger, the company also relies on expensive business seats and cargo. According to the data provided by Arkia's CEO, when the ticket price stands at $1,200 under the conditions described, the company is "around zero."
However, despite the statements by Arkia's CEO, industry figures told ice: "This is an extreme statement. The routes to New York are among the most profitable among Israel's aviation routes, and occupancy on them is even higher than average. Let us not forget that ticket prices are very dynamic, starting around $1,100 for a New York ticket, and as the plane fills up, the price even jumps to $2,500 in economy class. If Arkia were not profiting from them, it would simply abandon them."
