The theoretical and empirical literature on the cost structure of the provision of air transportation is reviewed, and cost functions for air travel in the California corridor are specified and estimated. A full cost model is developed; it identifies and measures key cost components—fuser, carrier, infrastructure, time and congestion, noise, accident, and pollution costs. Applying the models to data for domestic air travel in the California corridor, the total long-run average cost is estimated to be 11 cents per passenger km traveled. The single largest cost category is owning and operating a plane. In general, because of large fixed-cost components, the average cost of infrastructure exceeds the marginal cost.
Get full access to this article
View all access options for this article.
References
1.
DouglasG., and MillerJ.. Economic Regulation of Domestic Air Transport: Theory and Policy. Brookings Institution, Washington, D.C., 1974.
2.
KeelerT.Airline Regulation and Market Performance. Bell Journal of Economics, Vol. 3, 1972, pp. 399–424.
3.
CavesD., ChristensenL., and TrethewayM.. Economies of Density Versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ. Rand Journal of Economics, Vol. 15, No. 4, Winter1984, pp. 471–489.
4.
CavesD., ChristensenL., TrethewayM., and WindleR.. Network Effects and the Measurement of Returns to Scale and Density for U.S. Railroads. In Analytical Studies in Transport Economics, Daughety (ed.), Cambridge University Press, Cambridge, England, 1985.
5.
McShanS., and WindleR.. The Implications of Hub-and-Spoke Routing for Airline Costs and Competitiveness. Logistics and Transportation Review, Vol. 35, No. 3, Sept.1989, pp. 209–230.
6.
GillenD., OumT., and TrethewayM.. Airline Cost and Performance: Implications for Public and Industry Policies. Centre for Transportation Studies, University of British Columbia, Vancouver, B.C., Canada, 1985.
7.
GillenD., OumT., and TrethewayM.. Airline Cost Structure and Policy Implications: A Multi-Product Approach for Canadian Airlines. Journal of Transport Economics and Policy, Jan.1990, pp. 9–33.
8.
MorrisonS.Estimating the Long-Run Prices and Investment Levels for Airport Runways. Research in Transportation Economics, Vol. 1, 1983, pp. 103–131.
9.
GillenD., and LallA.. Economies of Scale for Airports. Working Paper. Wilfrid Laurier University, Waterloo, Ca., 1998.
10.
GolaszewskiR.The Unit Costs of FAA Air Traffic Control Services. Journal of the Transportation Research Forum, Vol. 28, No. 1, 1987, pp. 13–20.
11.
TaylorD.Allocation and Recovery of Federal Airport and Airway Costs. FAA, U.S. Department of Transportation, 1992.
12.
Directions. Royal Commission on National Passenger Transportation in Canada, Transport Canada, Ottawa, Ontario, 1994.
13.
Costs: B 737-300 and MD-80. Aviation Daily. Aug.12, 1995.
14.
Costs: B 737-400 and B737-500. Aviation Daily. Aug.14, 1995.
15.
BowmanL.Keep Up in Asia. Air Finance Journal. June1994, pp. 32–36.
16.
LevesqueT.Modeling the Effects of Airport Noise on Residential Housing Markets: A Case Study of Winnipeg International Airport. Journal of Transport Economics and Policy, Vol. 28, No. 2, 1994, pp. 199–210.
17.
GillenD.The Management of Airport Noise. DWG Research Associates for Transport Development Centre, Transport Canada, Ottawa, Ontario, July1990.
18.
LevinsonD., GillenD., and KanafaniA.. The Social Costs of Intercity Transportation: A Review and Comparison of Air and Highway. Transport Reviews, Vol. 18, No. 3, 1998, pp. 215–240.
19.
QuinetEmile.The Social Cost of Land Transport. OECD Environment Monograph No. 32, April1990.
20.
Full-Cost Transportation Pricing Study: Final Report to Transportation and Climate Change Collaborative. IBI Group, Boston, Mass., 1995.
21.
DrakeJ.Airline Network Efficiency: A Method of Analyzing Rationalized Networks with Applications to U.S. Examples. Purdue University Ph.D. Dissertation Series, Indianapolis, Ind., March1978.
22.
KanafaniA., and GhobrialA.. Airline Hubbing: Some Implications for Airport Economics. Transportation Research Report. Feb.1985.
23.
Airport Capacity and Delay. Report AC 150/5060-5, FAA, U.S. Department of Transportation, 1983.
24.
Social Cost of Road Accidents in Australia. Economics Report 79, Australian Bureau of Transport and Communications, Australian Government Publishing Service, Canberra, 1992.
25.
1994 Annual Report. Bureau of Transportation Statistics, U.S. Department of Transportation, 1994.
26.
Emissions of Greenhouse Gases in the United States 1987-1992. Energy Information Administration, Washington, D.C., Nov.1994.
27.
LevinsonD., MathieuJ., GillenD., and KanafaniA.. The Full Cost of High-Speed Rail: An Engineering Approach. Annals of Regional Science, Vol. 31, No. 2, 1997, pp. 189–215.
