economic essay 8 pages due in 48 hours
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EC2166-Lecture2.pdf
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Economics 2166F-001
Lecture 2 Industry Overview
Profits are cyclical and variable
US Airline Deregulation in 1978
• Average airfare decline • New entrants and low-cost carriers • Mergers and bankruptcies of large airlines • Emerging global airlines
Before Deregulation • Before Deregulation, airlines competed on service alone,
as fares were regulated by the government. Many remember this era fondly as the “golden age of aviation,” when stewardesses carved chateaubriand on rolling silver carts and airlines put piano lounges in the upper decks of their Boeing 747s. Passengers dressed up to board flights, and flying was glamorous and exciting— and mainly for the rich.
Airline load factors Load Factor
• Load factor is the ratio of revenue passenger miles over available seat-miles, representing the proportion of aircraft seating capacity that is actually sold and utilized.
• Load factor = RPM / ASM
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Low-cost carriers (LCCs) Annual growth for LCCs
LCC share LCC cost structure
• Point-to-point operation • Higher aircraft utilization rate • Higher labor productivity
Cost Comparisons between Low-Cost and Legacy Carriers
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Global airlines Summary
• Aviation industry is a large and growing segment of our economy.
• Some unique features of the industry can best be understood in the context of economic analysis.
