Did you know that whenever you purchase an airline ticket, your money goes to a lot more than just your physical seat on an airplane? While ticket prices vary from airline to airline, the airlines are responsible for sending a portion of ticket funds to other services. Here’s a basic diagram example of how the monies are dispersed:

Taxes collected as part of the purchase of a domestic passenger ticket are shown in green. They are the U.S. Transportation Tax and the U.S. Flight Segment tax. These taxes, along with other excise taxes are deposited into the Airport and Airway Trust Fund (AATF) which is a dedicated source of funding for the nation’s aviation systems. To the extent made available by law, the FAA uses some of these funds to finance a portion of its operations. The AATF is the sole source of funding for the FAA’s Airport Improvement Program (AIP) grants; Facilities and Equipment (F&E); and Research, Engineering and Development (R,E & D) activities.

The September 11th Security Fee portion of the ticket (shown in blue) are sent to the Transportation Security Administration (TSA). Passenger Facility Charges (PFC) (shown in orange) help to fund the U.S. airport infrastructure. Airports use these fees to fund FAA approved projects that enhance safety, security, or capacity; reduce noise; or increase carrier competition. PFC funds may also be used to raise money for airport improvement projects. Currently, the maximum that can be charged is $4.50 per segment (with a cap of $18 in Passenger Facility Charges per total flight). There are strict federal guidelines as to how the funds are used. Funds have to be used for projects that are directly related to the movement of passengers. So for example, using the funds for the terminal expansion is acceptable; but building a new parking garage is not. Other airline fees that you could see on a ticket include: baggage fees, seat upgrades, early boarding, unaccompanied minor fees, and departure tax on international flights.

Aside from the notion of making profit, there are things that affect the price of a passenger’s ticket. Breaking the cost down into per-person increments, with each ticket sold, every passenger pays for a portion of fuel costs for the flight, crew salaries, airport landing fees, aircraft maintenance, aircraft insurance, principal of the plane, taxes, and costs of running the airline. After all of that, the remaining cost makes up the profit that airlines receive. Keep in mind, that it is competition that drives ticket prices lower.

According to the Wall Street Journal, the average “profit per passenger” of the seven largest U.S. airlines was $17.75 — for just a one-way flight — and the average profit margin across those seven airlines was 9% in 2017.

Ticket prices generally cover the expense of the actual flight. The baggage fees, seat selection fees, flight change or cancellation fees, and other charges that accumulate during your flight go to the airlines, according to the Wall Street Journal. Baggage fees and reservation penalties are the two most lucrative categories for airlines in terms of net profits.

For the airlines, it’s a delicate balance of covering the cost to move people from point A to point B — with higher fuel prices — keeping fares low enough to stay competitive, making sure seats are full, and earning a profit. Thus the incentive for packing in more people and adding fees.

Along with traditional income and payroll taxes, airlines and their customers (passengers and shippers) pay many special taxes and fees to a variety of authorities, both at home and abroad. Among the stated purposes of these taxes and fees are Homeland (national) Security, environmental protection, agriculture inspection, infrastructure enhancement, airport and airway operations and maintenance, and agency financing. U.S. and foreign taxes have grown in number and amount, and scope since the advent of air transport. The amount a passenger pays in taxes and fees on a ticket varies according to their itinerary, including the number of times they board a new flight, and at which airports they land. U.S. Domestic Transportation Tax is applied to the base fare of every ticket. It is collected by the Internal Revenue Service and the money is used to fund FAA operations such as Air Traffic Control and radar operations.

In addition to the special taxes and fees captured in the table below, the Federal Aviation Administration also charges overflight fees to operators of aircraft that fly in U.S.-controlled airspace, but neither take off nor land in the United States.

Since 1980, the average round trip U.S. Domestic fare (with inflation) have dropped; costs have dropped 50% and continue to drop. Reasons for the decrease in fare prices are because of improvements in operations and fuel efficiency, and competition among airlines.

By the year 2025, getting an answer to the simple question, “How much is the fare?” could be a very different experience. In fact, over time, that common question itself could become irrelevant. A new ticket-selling technology, made possible by the ability to harness and analyze the unfathomably huge amounts of data that airlines collect and retain about every traveler and every possible routing, will make it possible for airlines to provide every travel shopper a unique, customized price for any given trip about which they may inquire. New Distribution Capability (NDC), is a new ticket-selling approach that uses airlines' enormous Big Data capturing abilities in concert with new artificial intelligence or "machine learning" methods to present to each travel shopper a unique, all-in price that includes not only the basic cost of a seat, but also the cost of many (or even all) of the travel services the customer desires. That includes the cost of basics like seat selection and checking a bag, services for which many travelers now are charged extra fees. Plus it includes -- or soon could include -- additional services like ground transportation and hotel rooms or eventually, services like dinner reservations and concert tickets and retail goods, ranging from travel accessories to clothing.

So next time you’re purchasing tickets for a vacation flight or a business trip, just remember how many things are included in the price of getting you from point A to point B. Flying to your destination is still more convenient and affordable than other modes of transportation, despite the plethora of variables included in the price.

Fun video that explains why flights are so expensive