ABSTRACT
This chapter analyzes the different types of costs that airlines incur as well as the techniques by which the airline industry has tried to reduce costs. It looks at the structure of airline costs. Costs are critically important to the operation of any firm and especially in the airline industry. To be successful and efficient, airlines must control cost and monitor its financial practice within their operations. Production costs comprise of any expenses associated with business activity for an organization. One of the fundamental characteristics of the airline industry is the presence of large fixed costs. A variable cost is an outlay that changes in proportion with production output. Marginal cost of any product or service is the cost of producing or delivering an additional unit of that product. The chapter concludes with concrete examples of the many ways that airlines have reduced costs from the increase in automation to reductions in capacity and staffing levels.
