Describe Economies of Scale in airline operations
Airline economies of scale result from extensive use of large-sized planes.Market conditions (sufficient demand) must exist to permit the efficient utilization of larger planes (i.e., if the planes are flown near capacity, the seat-mile costs will obviously decrease).
Unlike other industries, the airline can not "inventory" an unused seat. If the plane takes off with the empty seats, the seats are "lost" for that flight because the airline cannot inventory the excess capacity for another flight that might be overbooked.
The marginal cost of filling those 10 empty seats right before the doors on the aircraft are closed are negligible. Another factor indicating large-scale operations for air carriers is the integrated communication network required for activities such as operating controls and passenger reservations.
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