Operating costs and capacity in the airline industry

Operating costs and capacity in the airline industry

Journal: Air Transport Management

Author: Wen-Hsien Tsai, Lopin Kuo

Published: 2004

Abstract

This study illustrates how to calculate accurate costs, including the operating costs for individual airplanes and flights, as well as the costs per available seat kilometers, and per available ton kilometers using activity based costing. It also identifies the main activity items and drivers of each airplane and flight. Additionally, it uses a case study to illustrate the calculation of production variance, marketing variance and expected idle passenger capacity in the airline industry. This is useful information when the purchase or lease an airplane under the conditions of idle capacity.

Keywords: Activity-based costing (ABC); Operating costs; Idle passenger capacity; Airline industry

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