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Integrated Air Freight Cost Structure: The Case of Federal Express

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  • Kiesling, Max K.
  • Hansen, Mark

Abstract

This paper analyzes the economic structure of the integrated air freight industry. We evaluate a total cost model for Federal Express, Inc. by analyzing quarterly time-series data from 1986-1992. We find that Federal Express, and arguably all dedicated air freight carriers, exhibit diseconomies of scale and significant economies of density. We show that these two economic concepts can be restrictive, however, and introduce a third aspect of the integrated air freight industry’s economic structure that combines the effects of economies of density and economies of scale. We call it economies of size, and show that Federal Express exhibits approximately constant economies of size. The conditions under which these findings hold are discussed.

Suggested Citation

  • Kiesling, Max K. & Hansen, Mark, 1993. "Integrated Air Freight Cost Structure: The Case of Federal Express," University of California Transportation Center, Working Papers qt7338517g, University of California Transportation Center.
    • Handle: RePEc:cdl:uctcwp:qt7338517g
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    Cited by:

    1. Bombelli, Alessandro, 2020. "Integrators' global networks: A topology analysis with insights into the effect of the COVID-19 pandemic," Journal of Transport Geography, Elsevier, vol. 87(C).
    2. Hall, Randolph W., 2001. "Truck Scheduling for Ground to Air Connectivity," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt2vh5j4hz, Institute of Transportation Studies, UC Berkeley.
    3. Paolo Malighetti & Gianmaria Martini & Renato Redondi & Davide Scotti, 2019. "Integrators’ Air Transport Networks in Europe," Networks and Spatial Economics, Springer, vol. 19(2), pages 557-581, June.
    4. Hall, Randolph W. & Lo, Shih-Che, 2002. "Truck Scheduling for Ground to Air Connectivity: Final Report," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt85v0x577, Institute of Transportation Studies, UC Berkeley.
    5. Balliauw, Matteo & Meersman, Hilde & Onghena, Evy & Van de Voorde, Eddy, 2018. "US all-cargo carriers’ cost structure and efficiency: A stochastic frontier analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 29-45.
    6. Lakew, Paulos Ashebir, 2014. "Economies of traffic density and scale in the integrated air cargo industry: The cost structures of FedEx Express and UPS Airlines," Journal of Air Transport Management, Elsevier, vol. 35(C), pages 29-38.

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    Keywords

    Social and Behavioral Sciences;

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