Airline Costs
~ - zero marginal cost of extra pax., if Npax < max. Npax
Why do airline costs vary ?
- Route Traffic density leading to different levels of Utilization
- Variation in demand due to seasonal peaks
- Scale of airline’s operation, but effect is to a limited extent
- Study on US airlines in 1969
- 4 largest airlines earned lower ROR on capital compared to next 7
- Most competitive route networks of the 4 biggest
- Many flights over major metropolitan areas with high total travel time
- Cost of maintaining higher Technology standards
- Unprofitable short-haul routes operated due to social obligations by 2
- Economies of scale only when homogenous input & output exist
- Recent order of 188 A319, A320, A321 AIRBUS aircraft by BA
- 59 confirmed orders and 129 options