There are a number of reasons why labor costs may be a competitive advantage for start-up airlines over more established carriers.
What is labor costs?
The total of all employee wages, employee benefits, and payroll taxes paid by an employer constitutes the cost of labour. Direct as well as indirect (overhead) labour costs are separated. While indirect costs are related to support labour, such as workers who maintain factory equipment, direct costs include wages again for employees who produce a product, including those on an assembly line. Manufacturers factor in labour, material, and overhead costs when determining the selling price of a product. If any costs are excluded from the calculation of the sales price, the amount of profit is less than anticipated. The sales price must include all costs incurred.
First, start-ups may be able to negotiate more favorable labor contracts with unions or other labor groups. Second, start-ups may be able to attract and retain workers with lower salaries and benefits than more established carriers. Finally, start-ups may be able to utilize new technologies and work practices that result in lower labor costs.
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