Airline cost structure: variable costs, human weight issues
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An airline has the following cost categories:
? Fuel and oil
? Flying operations labor (flight crews - pilots, co-pilots, navigators and flight engineers)
? Passenger service labor (flight attendants)
? Aircraft traffic and servicing labor (personnel servicing aircraft and handling passengers at gates, baggage, and cargo).
? Promotions and sales labor (reservations and sales agents, advertising and publicity).
? Maintenance labor (maintenance of flight equipment and ground property and equipment)
? Maintenance overhead
? Ground property and equipment (landing fees, rental expenses, and depreciation for ground property and equipment).
? Flight equipment (rental expenses and deprecation on aircraft frames and engines)
? General overhead (admin. personnel, utilities, insurance, communications, etc.)
Questions:
1) Which of the above costs are likely to be affected if an airline adds an airport to its network?
2) Which of the above costs are likely to be affected if an airline schedules one more flight out of an airport that the airline already serves?
3) Which of the above costs are likely to be variable with respect to the number of passengers who actually fly on a particular scheduled flight?
4) Weight is key to the fuel cost of airlines. How should airlines deal with the weight of an individual passengers?
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Solution Summary
The problem poses several questions about which variable costs would increase considering four expansion ideas. The solution outlines which costs and way. There are links for further reading.
Solution Preview
I have numbered the cost categories for ease in answering the questions.
An airline has the following cost categories:
1. Fuel and oil
2. Flying operations labor (flight crews - pilots, co-pilots, navigators and flight engineers)
3. Passenger service labor (flight attendants)
4. Aircraft traffic and servicing labor (personnel servicing aircraft and handling passengers at gates, baggage, and cargo).
5. Promotions and sales labor (reservations and sales agents, advertising and publicity).
6. Maintenance labor (maintenance of flight equipment and ground property and equipment)
7. Maintenance overhead
8. Ground property and ...
Purchase this Solution
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