Airline Economics: An Introductory Survey

Abstract

This paper has surveyed the topics in the field of airline economics, including areas such as airline costs and production, airline demand and revenue management, airline financial issues, and airline profitability. The debates in these areas are explored from an economic perspective to help readers understand contemporary economic issues and challenges facing the airline industry, and to provide the airline management with an economic way of thinking in dealing with these issues. This paper also aims to serve a purpose for air transport researchers to consider some under-researched areas where definitive answers to some interesting issues are still lacking. These include, among others, effective ways of reducing fuel cost risks such as fuel hedging and the adoption of new technologies, development of non-price competition strategies that can be used by airlines to differentiate their products, establishing new marketing strategies, and redesigning airline networks when surface transportation modes (e.g., high-speed rail) become a threat.