ABSTRACT
The costs of supplying airline services are an essential input to many decisions taken by airline managers. The way that an airline’s costs are broken down and categorized will depend on the purpose for which they are being used. In airline planning, cost information is required for three key purposes. First, airlines require an overall breakdown of their total expenditure into different cost categories as a general management and accounting tool. They need a general breakdown of costs to show cost trends over time, to measure the cost efficiency of particular functional areas such as flight operations or passenger services, and ultimately to enable them to measure their operating and non-operating profit or loss. Secondly, an assessment of costs is essential in any evaluation of investments, whether in new aircraft or in new routes or services. Lastly, cost identification is crucial in the development of pricing policies and pricing decisions, for both passengers and cargo.
