The influence of aircraft size on airline operating costs

Many previous studies have shown that there are probably no economies of scale in the airline industry directly attributable to firm size. Scale effects within the firm, however, have often been suggested, particularly for example with regard to such firm-size independent factors as market density, route length, or aircraft size. The focus of this paper is the effect of aircraft size on an airline's unit cost. Though much of the previous evidence appears to be at variance with a priori expectations, the empirical results presented here suggest that most of the divergence is probably due to a conceptually inadequate basis of comparison. Appropriately compared, actual unit costs were generally found to decrease at a decreasing rate with aircraft size, though as the route length parameter is reduced some mild diseconomies appeared. Of further interest, the behavior with size of the underlying cost components was found to be quite diverse, the (far from uniform) decreases with size in unit crew, fuel, and maintenance costs being offset somewhat by increases in unit capital costs, insurance plus other costs, and landing fees.