ABSTRACT
Variable operating costs, which may represent up to 50 per cent of total operating costs, can be escaped in the short term by cancellation or withdrawal of services. In the medium term, perhaps as much as 90 per cent of costs can be saved by disposal of aircraft, reduction of staff, closing of offices, and so on. Through their ability to increase or reduce their 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 upon and is being planned for, what factors then determine the precise level of costs that will be incurred?
