ABSTRACT
It was suggested in the previous chapter that variable operating costs, which may represent up to 40 per cent or so of total operating costs, can be escaped in the short term by the cancellation or withdrawal of services. In the medium term a very much higher proportion of costs is escapable. Perhaps as much as 90 per cent of costs can be saved by the disposal of aircraft, reduction of staff, closing of offices and so on within two years or so. Through the ability to increase or reduce the scale and pattern of operations airline managements can directly affect their total costs. In this sense management control over costs may be absolute and constrained only by the desires of shareholders, whether governments or private individuals or firms. Clearly, overall costs are broadly determined by the level of supply, that is, the volume of output, decided upon by the management. But once a level of output has been decided and is being planned for, what factors then determine the precise level of unit costs, that is, costs per tonne kilometre or seat kilometre, that will be incurred?
