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Economies of scope in the air transport industry

by:CNS     2021-07-09
The economy of scope in the air transport industry 2021-06-20 15:20:31 The economy of scope means that the combined output of a single enterprise exceeds the output that two enterprises each producing a product can achieve. The economies of scope may be caused by the joint use of investment factors or production equipment, as well as joint market plans and other common management factors that can reduce costs. Generally speaking, there are no economies of scope in the production of a single product, only economies of scale; but in multi-product or multi-factory production, as the number and variety of products increase, not only the average cost tends to decrease, but also the average cost tends to decrease. The total cost of production may also be lower than the total production of multiple enterprises. At this time, there are both economies of scale and economies of scope. The economy of scope of an airline means that the cost of an airline to add a new route to an existing network or a hub-and-spoke operation network is lower than the cost of a new airline to provide the same route service. For airlines, their transportation products are complex. Each volume in the logistics flow can have different transportation directions, different destinations, and different haul distances. Therefore, it can be considered that the transportation provided by the airline on different routes Services are different products, and the connecting flights can be regarded as joint production of crystals. The main input equipment for the flight product is aircraft. The higher the utilization rate of the aircraft, the more beneficial to the airline. If the connecting flights are operated by the same airline, the same aircraft of the same airline can carry out several connecting flights, and the cost is much lower than that of several separate flights. The situation where the flights are operated separately, thereby greatly improving production efficiency, reducing resource waste, and conforming to the characteristics of economies of scope. And for airlines, while carrying passengers, they also have to carry part of the cargo. In this way, the transportation cost of simultaneously transporting passengers and goods on one plane is lower than the cost of using two planes to transport passengers and goods separately.Although this seems to be a common sense problem, it is actually the economy of scope that is at work. effect. As airlines increase their navigable cities, because Guangzhou-Hegang logistics companies share a lot of resources, the incremental cost is small, and due to various factors such as the increase in the average utilization of aircraft and the increase in flight density, the total number of airlines will be increased. The cost shows a weak increase. When an enterprise provides transportation services on multiple routes, it exhibits obvious economic scope effects, that is, as the routes increase, the average transportation volume on each route will increase correspondingly, and the total transportation volume will increase at an increasing rate. At this time, due to the increase in aircraft utilization and the use of larger aircraft models, the unit transportation cost of airlines will be reduced, and even when the total cost of all routes operated by one company is smaller than the total cost of multiple companies to split the market, it will be formed. The company has an efficient and exclusive monopoly. The economy of scope of air transportation is mainly reflected in the economy of size of service nodes. It is generally believed that the hub route network is more economical in various scopes, because it chooses to integrate multiple feeder airline passenger flows and concentrate on the hub route to achieve its density economy. The essence of this kind of network is to produce multiple branch products at the same time, which realizes the sharing and saving of resources and equipment. The logistics company from Guangzhou to Heihe has obtained a relatively low average cost, so it has economies of scope. And there is another special phenomenon of air transportation, which also belongs to the economy of scope, which is the code sharing between airlines. Code sharing is a phenomenon in which flight numbers of different airlines are shared. Passengers taking a flight of Airline A are likely to be actually flying by Airline B. The essence of code sharing is that Airline A believes that the cost of its own production of products on this route is too high, and taking into account the economics of the above-mentioned range, opening this route will obtain great benefits; while Airline B may be due to its own route products. Relevance: The incremental cost of flying this route is relatively low. At the same time, the cost of producing its original route products and the route cost shared by Airline A may be lower than the total cost of joint production by both parties, so it is also economical in various scopes. So the two parties reached an agreement, while satisfying the interests of both parties.
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