ABSTRACT
This chapter analyzes the different types of costs that airlines incur and analyzes techniques by which the airline industry has tried to reduce costs. The understanding of cost principles is applicable to any business since without the knowledge of where the cost of a product originates, the business may not be able to make a profit selling that product. The chapter begins with a discussion of accounting costs in general and then moves to the specifics of the airline industry. One of the fundamental characteristics of the airline industry is the presence of large fixed costs. Airlines also incur costs that are not related to airline operations. Non-operating costs are expenses arising from activities not associated with the rendering of air transport services. The airline industry seems to continually experience tough economic and financial conditions. To understand actions airlines must take for survival, consider the only US legacy carrier that has not been in bankruptcy protection: American Airlines.
