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Economies of scale in the air transport industry

by:CNS     2021-07-09
The economy of scale in the air transport industry 2021-06-20 12:14:34 For the air transport industry, after the airline's production increases, its unit product production cost can be reduced, so as to obtain economic benefits from business growth. This kind of economic benefit realized by the expansion of production scale is called the scale economy of the air transportation industry. The scale economy of the Guangzhou-Changchun logistics line in air transportation is mainly realized through transportation density economy and partial size economy. The density economy of the air transportation industry refers to the phenomenon that the increase in transportation services reduces the unit cost under the existing air route network scale. The size economy of the air transportation industry refers to the phenomenon that the average cost of the total transportation output expanded in the same proportion as the transportation size under the condition that the transportation density on the route network remains unchanged. For example, route density economy refers to the phenomenon that the average transportation cost on a specific route is continuously decreasing due to the increase in transportation density. The economy of airplane carrying density refers to the phenomenon that the average transportation cost gradually decreases with the increase of airplane carrying capacity. Fleet economies of scale refer to the phenomenon that the average transportation cost gradually decreases as the fleet expands. The economies of scale of air transportation are mainly reflected in the following aspects. 1) Flight frequency density economy refers to the phenomenon that the unit cost decreases with the increase of airline flight frequency on a certain route. For example, on a certain route, there was only one round-trip flight a week, and now one round-trip flight is added. Then the cost of the increased frequency may double the flight cost.However, because the two flights can share the crew, share management resources, and share equipment. The increase in maintenance and depreciation expenses in indirect operating costs and direct operating costs is less than doubled. Therefore, the average cost of each flight from Guangzhou to Ningde Cargo Co., Ltd. has decreased, forming a density economy of flight frequency. 2) Airport capacity density economy For an airport, according to its passing capacity, increasing the frequency and number of threats will reduce the average cost of the airport. The density economy of airport capacity is very obvious, because the fixed cost of the cost of the airport is relatively large, and this part of the cost is to be allocated to each flight and each airline. The more the number of participating in the allocation, the more important it is for each flight. The lower the fee, the more economical. This has also led to the 'Matthew effect' of the airport to a certain extent, that is, airports with more flights will increase the number of flights, and airports with fewer flights will only become more and more deserted. Therefore, in many cases, in order to encourage airlines to open routes in remote areas, or take off and land at regional airports, the government will issue corresponding support policies to reduce airport costs or give certain preferential policies to airlines taking off and landing at these airports. 3) Aircraft capacity density economy Studies have shown that the seat kilometer cost of a large aircraft is significantly lower than that of a small aircraft. On the one hand, large aircraft can carry a large number of passengers and share more jet fuel. On the other hand, under the condition of unchanged aircraft frequency, an increase in aircraft load factor will also cause a decrease in average cost. 4) The cost of flight distance and economic air transportation has a phenomenon of 'decreasing farther and farther.' The main reason for this phenomenon is that the fuel consumption of the aircraft during the climb phase is very large, while the fuel consumption of the cruise is relatively small. Therefore, as long as the number of takeoffs and landings does not increase and only the flight distance is extended, the average flight cost is reduced. 5) Economies of scale in maintenance management There are obvious economies of scale in the maintenance of aircraft and the management of the entire operation, especially in aircraft maintenance. Because the cost of aircraft maintenance occupies a large proportion of the operating cost, the economies of scale in this part of the cost are mostly explored and utilized by airlines. When the number of aircraft owned by airlines increases, especially with the increase of aircraft of the same type, the airline's aircraft maintenance efficiency will be significantly improved. Because the maintenance parts and personnel of the aircraft are generally equipped with one or two models, which have a certain degree of exclusivity, the number of the same models has increased, and the maintenance personnel can be shared, some accessories can be shared, and maintenance can be arranged easily. Plan to produce a 'multiplier effect.' In 1997, Ohm et al. conducted an empirical study on the U.S. air transport industry, and concluded that the average load of aircraft and the volume of transport completed, and the average haul distance have a significant correlation with the size of the network, and the scale economy coefficient is 1.155. Boyer pointed out through simulation in his book 'Principles of Transportation Economics' published in 1997 that airlines can obtain economies of scale by increasing equipment utilization (such as increasing flight load factor). According to Boyle's calculations, for every 1% increase in passenger load factor, unit cost can be reduced by 2.64%.
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