The Evolving Air Transport Industry

vi INTRODUCTION TO AIR TRANSPORT ECONOMICS
4 Cost and Production Analysis: The General Concepts 77
Cost classifications 79
Cost functions 82
Economics of scale, scope, and density 89
Airline industry cost structure 92
Airline economies of scale, scope, and density 99
Airline break-even analysis 101
Operating leverage 102
Airline operating leverage 104
Summary 105
5 Aviation Infrastructure: Operations and Ownership 107
The air traffic control system 108
Institutional problems in US air traffic control 113
ATe in a government corporation 114
Political obstacles to reform 114
Airport ownership and management 115
Summary 121
Appendix: Airport codes 121
6 International Economics and Aviation 123
International economics and trade 124
The logic of production possibility, absolute advantage, comparative
advantage and free trade 131
Trade protections and trade barriers 138
Foreign currency and exchange rates 140
Summary 143
Appendix: International free trade agreements 143
7 International Aviation: Open Skies and Global Alliances 153
A brief history of international aviation agreements 154
Bilateral air service agreements 155
Open skies agreements 160
Open skies in Europe 163
Open skies in Asia 164
Global airline alliances 166
Summary 175
8 Market Structure and Monopolistic Markets 179
Perfect competition 180
Monopoly 186
Price/output decision for monopolies 193
Monopoly pricing and consumer well-being 196
Market structure in the aviation industry 197
Summary 202
Appendix: The relationship between monopoly pricing and elasticity
of demand 202