Cost Economics of Aircraft Size

Abstract

The authors study the relationship between aircraft cost and size for large commercial passenger jets. Based on a translog model, they develop an econometric cost function for aircraft operating cost and find that economies of aircraft size and stage length exist at the sample mean of their data set, and that for any given stage length there is an optimal size, which increases with stage length. The scale properties of the cost function are changed considerably if pilot unit cost is treated as endogenous, since it is correlated with size. The cost-minimising aircraft size is therefore considerably smaller, particularly at short stage lengths, when pilot cost is treated as endogenous, and this helps to explain why US airlines expect to accommodate future traffic growth with more flights instead of larger planes.

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