This paper seeks to extend the knowledge on airline cost structure where there is a significant variation in the size of carriers, and to clarify the issue of scale economies for small carriers. The results of the single output cost structure is extended to a case of multiple outputs, where carriers produce substantial charter and/or freight services, to see whether or not the empirical results on returns to scale and traffic density would hold for multiple output producers. The study also tests whether the fixed firm effect model suggested in a previous study is useful when an extended time-series data set is used for each firm. Data from the Canadian airline industry is used to develop a multi-product total cost model that emphasizes the roles of the firm's network and output attributes in determining costs. Parameter estimates of the total costs model are presented, and key findings on cost structures are compared with those obtained from a variable cost function. The key empirical results on cost structure obtained from the variable cost function are found to be similar to those of the total cost function. Since both the total and variable cost models have weaknesses, the true empirical results are likely to be somewhere between those obtained from the total and variable cost functions. The costs structure estimated in this paper can help determine the likely outcomes of Canadian air transport deregulation.

  • Availability:
  • Supplemental Notes:
    • This paper originally published in Journal of Transport Economics and Policy, 24(1), January 1990, pp 9-34.
  • Corporate Authors:

    Edward Elgar Publishers

    William Pratt House, 9 Dewey Court
    Northampton, MA  United States  01060-3815
  • Authors:
    • Gillen, D W
    • Oum, T H
    • Tretheway, M W
  • Publication Date: 2002


  • English

Media Info

  • Features: Appendices; References; Tables;
  • Pagination: p. 110-135
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00961822
  • Record Type: Publication
  • ISBN: 1840645490
  • Files: TRIS
  • Created Date: Aug 15 2003 12:00AM