Influencing Operational Costs in the Cockpit – The Cost Index

Like all businesses, airlines operate in a commercial world and anything that can be done to reduce costs may mean the difference between a profit or a loss at the end of a financial year.

Flight crews can have an impact on operational costs, for example by using initiatives to reduce fuel burn and by ensuring the correct use of flight parameters, such as the Cost Index. 

The cost of any flight can be considered to have a fixed component (overhead expenses), time dependent costs and fuel costs.

The fixed costs are always present and cannot be influenced by the flight crews however time dependent costs and fuel costs are dependent on speed, a parameter that flight crews can influence.

The faster an aircraft flies, the shorter is the flight duration, hence the lower the time dependent costs but at the same time the aircraft will burn more fuel by flying faster. Conversely, flying slower will increase the time dependent costs (flight time is higher) but fuel burn will be lower. 

The wealthy owner of a business jet would probably say that “time is money” and hence request that the pilot flies at the fastest possible speed to minimize the flight duration regardless of the impact on the fuel cost. Unfortunately, airlines cannot afford such a luxury and need to ensure the correct balance is struck between these two conflicting costs, which is where the Cost Index comes in.

The Cost Index is defined as the cost of time divided by the cost of fuel (as shown below).

For ease of understanding, let us assume the cost of time of operating a given aircraft, is 50$ per minute and the cost of fuel is 1$ per kg, this will give a Cost Index of (50 ($/min) divided by 1($/kg)) = 50 kg/min

This should not be mistaken with a fuel consumption value (which also has the same units) but we may consider this Cost Index value as providing an “exchange rate” between time costs and fuel costs, in our current example, a CI of 50 kg/min is telling us that 50kg of fuel burn is equivalent to 1 minute of flight time.

This is how the FMS interprets the CI value as it can readily handle time and fuel parameters but lacks the understanding of financial parameters. 

When a pilot enters a CI into the FMS, the FMS will continuously perform calculations based on this CI and the (varying) flight conditions of aircraft weight, altitude, temperature, and winds to define a speed (the managed speed or economical speed) and flight profile optimised to reduce overall flight costs. 

It should be stressed that the CI is not a parameter to control the speed of the flight but a parameter which reduces overall flight costs.

We should also mention that a correctly established CI requires the inputs of many different contributors at the airline (finance, accounting, maintenance and engineering, flight operations engineering etc,) which is the reason why the CI should not be changed arbitrarily before or during the flight.

Establishing a correct CI is not always easy, primarily due to the difficulty in isolating time dependent costs which are very dependent on an airline’s maintenance set up and crew (flight & cabin) salary components.

We may even need to consider adaptations to the CI to consider tankered flights, hedged fuel prices and more frequently, flight delays.

However, those airlines which have taken the effort to calculate the CI as precisely as possible are ensuring that flights are executed with speed and profiles to reduce overall flight costs.

Madan Virdee

Fuel & Flight Efficiency Expert at NAVBLUE

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