An Introduction to Airline Economics (6th Edition)

271 Pages·2000·1.38 MB·English

by  William E. O'Connor

AN INTRODUCTION TO
AIRLINE ECONOMICS

AN INTRODUCTION TO
AIRLINE ECONOMICS
Sixth Edition
WILLIAM E. O’CONNOR
LibraryofCongressCataloging-in-PublicationData
O’Connor,WilliamE.
Anintroductiontoairlineeconomics/WilliamE.O’Connor.—6thed.
p.cm.
Includesbibliographicalreferencesandindex.
ISBN0–275–96911–8(alk.paper)
1. Airlines—UnitedStates. 2. Airlines—UnitedStates—Management. I. Title.
HE9803.A4026 2001
387.7'1'0973—dc21 00–032620
BritishLibraryCataloguinginPublicationDataisavailable.
Copyright(cid:1)2001byWilliamE.O’Connor
Allrightsreserved.Noportionofthisbookmaybe
reproduced,byanyprocessortechnique,without
theexpresswrittenconsentofthepublisher.
LibraryofCongressCatalogCardNumber:00–032620
ISBN:0–275–96911–8
Firstpublishedin2001
PraegerPublishers,88PostRoadWest,Westport,CT06881
AnimprintofGreenwoodPublishingGroup,Inc.
www.praeger.com
PrintedintheUnitedStatesofAmerica
TM
Thepaperusedinthisbookcomplieswiththe
PermanentPaperStandardissuedbytheNational
InformationStandardsOrganization(Z39.48–1984).
10 9 8 7 6 5 4 3 2 1
Contents
Tables ix
Preface xi
Abbreviations xv
1 An Overall Look at the Structure of Air Transportation 1
EconomicRegulationDefined 2
Regulatory Reform 2
The TransportationStatute 4
Special EconomicCharacteristics 5
Other EconomicCharacteristics 7
Characteristicsof InternationalService 8
Structureof the U.S. Airline Industry 9
2 How Airlines Serve the Public Interest 13
U.S. PublicInterestObjectives 13
Objectivesof InternationalAirline Service 16
3 Entry and Exit 21
Airline Entry and ExitPolicies 21
GovernmentRegulationof Entry 24
vi Contents
GovernmentRegulationof Exit 39
Mergers and Acquisitions 41
InternationalEntry—BilateralAgreements 46
CurrentTrends in InternationalAirline Service 56
4 The Costs of Airline Service 69
AccountingCategories 69
Analysis of Costs 71
The ProductionFunctionand Factor Costs 76
The Two Major AirlineCost Areas 80
AircraftSelectionas a Determinantof Costs 89
Impactof TechnologicalAdvanceson Costs 97
5 The Demand for Airline Service 103
Some DemandCharacteristics 103
Methodsof EstimatingDemand 109
Passenger Options 114
Travel Agenciesand ComputerReservationsSystems 118
6 Airline Rates 127
Basic RatemakingFactors 127
The ChangingStructureof Airline PassengerFares 131
Rate Regulation 138
InternationalRates—Dealingswith Foreign Governments 146
7 Air Cargo 153
The Cargo Mix 156
Cargo versus PassengerCharacteristics 162
Types of Aircraftand Their Impacton Cargo 162
TerminalFacilities 167
Pickup and Delivery Service 173
Air Freight Forwarders 175
Competitionwith Other Modes 180
Competitionfor Cargo betweenU.S. and Foreign Airlines 184
The Sellingof Air FreightService 185
Unitization—Containersand Pallets 188
Cargo Rates 190
Cargo Charters 194
Contractand PrivateCarriage of Cargo 195
Some CurrentProblems 197
Contents vii
8 Current Problem Areas 205
Airport–AirlineRelations 205
Questionsfor the Future 211
Self-Testing Questions 217
Appendix:TransportationStatute—DigestofSelectedPortions 229
Selected Bibliography 237
Index 245

Tables
1. Passenger Traffic, Domestic and International, U.S.
Scheduled Airlines, 1940–90 by Decade, and 1998 8
2. U.S. Major Airlines, Ranked by 1998 Operating Revenues 10