Which statement correctly describes fixed costs and variable costs in a private aviation context and how they affect pricing?

• A. Fixed costs vary with usage
• B. Fixed costs are constant regardless of usage (overhead, depreciation); variable costs scale with activity (fuel, landing/tac fees, crew time); pricing must cover both plus profit.
• C. All costs are fixed.
• D. Pricing should ignore fixed costs and only consider marginal costs.

Answer: (B)

In pricing for private aviation, the essential idea is to separate costs into fixed and variable categories and build prices that cover both plus profit. Fixed costs stay constant no matter how much you fly. They include overhead, depreciation, insurance, and core staff salaries. Variable costs rise with activity: fuel burn, landing and taxi fees, crew time, and other per-flight expenses.

Because fixed costs don’t disappear on a light flight and variable costs add up with each flight, the price you set should be enough to cover the variable costs of the specific trip plus a portion of the fixed costs, and then include a profit margin. If you priced only based on marginal or variable costs, there’d be a risk you don’t recover fixed costs over time, especially during periods with lower flight activity.

So the correct statement is that fixed costs are constant regardless of usage, variable costs scale with activity, and pricing must cover both plus profit.