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Operating costs and capacity in the airline industry

Author

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  • Tsai, Wen-Hsien
  • Kuo, Lopin

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.

Suggested Citation

  • Tsai, Wen-Hsien & Kuo, Lopin, 2004. "Operating costs and capacity in the airline industry," Journal of Air Transport Management, Elsevier, vol. 10(4), pages 269-275.
    • Handle: RePEc:eee:jaitra:v:10:y:2004:i:4:p:269-275
    DOI: 10.1016/j.jairtraman.2004.03.004
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    References listed on IDEAS

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    1. Tsai, Wen-Hsien, 1996. "A technical note on using work sampling to estimate the effort on activities under activity-based costing," International Journal of Production Economics, Elsevier, vol. 43(1), pages 11-16, May.
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    Citations

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    Cited by:

    1. Li, Sui-Ling, 2014. "The cost allocation approach of airport service activities," Journal of Air Transport Management, Elsevier, vol. 38(C), pages 48-53.
    2. Tsai, Wen-Hsien & Lai, Chien-Wen & Tseng, Li-Jung & Chou, Wen-Chin, 2008. "Embedding management discretionary power into an ABC model for a joint products mix decision," International Journal of Production Economics, Elsevier, vol. 115(1), pages 210-220, September.
    3. Okan Berkcan & Tamer Aksoy, 2022. "Assessing the effect of proactive maintenance scheduling on maintenance costs and airline profitability: The case of Turkish Airlines Technic," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(4), pages 213-238, June.
    4. Mallikarjun, Sreekanth, 2015. "Efficiency of US airlines: A strategic operating model," Journal of Air Transport Management, Elsevier, vol. 43(C), pages 46-56.
    5. Wai Hung Wong & Anming Zhang & Yer Van Hui & Lawrence C. Leung, 2009. "Optimal Baggage-Limit Policy: Airline Passenger and Cargo Allocation," Transportation Science, INFORMS, vol. 43(3), pages 355-369, August.
    6. Tsai, Pei-Hsuan & Chen, Chih-Jou, 2021. "Entertainment in retailing: Challenges and opportunities in the TV game console industry," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    7. Singh, Jagroop & Sharma, Somesh Kumar & Srivastava, Rajnish, 2019. "What drives Indian Airlines operational expense: An econometric model," Journal of Air Transport Management, Elsevier, vol. 77(C), pages 32-38.
    8. Baykasoglu, Adil & Kaplanoglu, Vahit, 2008. "Application of activity-based costing to a land transportation company: A case study," International Journal of Production Economics, Elsevier, vol. 116(2), pages 308-324, December.
    9. Berrittella, Maria & La Franca, Luigi & Zito, Pietro, 2009. "An analytic hierarchy process for ranking operating costs of low cost and full service airlines," Journal of Air Transport Management, Elsevier, vol. 15(5), pages 249-255.
    10. Wen-Hsien Tsai & Shang-Yu Lai, 2018. "Green Production Planning and Control Model with ABC under Industry 4.0 for the Paper Industry," Sustainability, MDPI, vol. 10(8), pages 1-29, August.
    11. Tsai, Wen-Hsien & Lee, Kuen-Chang & Liu, Jau-Yang & Lin, Hsiu-Ling & Chou, Yu-Wei & Lin, Sin-Jin, 2012. "A mixed activity-based costing decision model for green airline fleet planning under the constraints of the European Union Emissions Trading Scheme," Energy, Elsevier, vol. 39(1), pages 218-226.
    12. Dominik Punda & Malgorzata Jasiulewicz-Kaczmarek & Jacek Dziwulski, 2021. "Economization Methods Used by Low-Cost Airlines – An Overview," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 301-310.
    13. Shaban, I.A. & Wang, Z.X. & Chan, F.T.S. & Chung, S.H. & Eltoukhy, A.E.E. & Qu, T., 2019. "Price setting for extra-baggage service for a combination carrier using the newsvendor setup," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 1-14.
    14. Wen-Hsien Tsai & Yin-Hwa Lu, 2018. "A Framework of Production Planning and Control with Carbon Tax under Industry 4.0," Sustainability, MDPI, vol. 10(9), pages 1-24, September.

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