Why flying stopped being glamorous

BravoHotel said:
Yes it is. Economies of scale is not limited to how efficient a factory produces a widget. How efficiently an airline can put a butt in a seat certainly falls within in the economy of scale concept.
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Sure, airlines have become more efficient. However, airlines enjoy economies of scale until they don’t. In many ways, airlines see diseconomies of scale. It’s more accurate to say that airlines of similar size and scope enjoy similar economies and diseconomies of scale.

Reducing profits to reduce the cost of a seat is not an example of an economy of scale.

If I start an airline based at ABC, where all the labor is cheap and lives proximate to ABC, where all maintenance is performed at ABC, where gates are cheap, I can enjoy economies of scale during growth. When I expand outside of ABC, I may no longer enjoy an economy of scale.

We have seen many cases of airlines absorbing other airlines without decreases in expenses or increases in profitability. If economies of scale were primary drivers these mergers would be magic. Economies of scale and reduced competition should automatically yield increased profits, that hasn’t been the case. Even a monopoly doesn’t guarantee a profit, monopolies still are slaves to supply-demand curve.
 
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Pilot Fighter said:
Sure, airlines have become more efficient. However, airlines enjoy economies of scale until they don’t. In many ways, airlines see diseconomies of scale. It’s more accurate to say that airlines of similar size and scope enjoy similar economies and diseconomies of scale.

Reducing profits to reduce the cost of a seat is not an example of an economy of scale.

If I start an airline based at ABC, where all the labor is cheap and lives proximate to ABC, where all maintenance is performed at ABC, where gates are cheap, I can enjoy economies of scale during growth. When I expand outside of ABC, I may no longer enjoy an economy of scale.

We have seen many cases of airlines absorbing other airlines without decreases in expenses or increases in profitability. If economies of scale were primary drivers these mergers would be magic. Economies of scale and reduced competition should automatically yield increased profits, that hasn’t been the case. Even a monopoly doesn’t guarantee a profit, monopolies still are slaves to supply-demand curve.
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If an airline has 10 airplanes and buys 20 spare tires, they are probably going to be paying more per tire than the airline that has 100 airplanes and buys 200 spare tires.

The airline that uses SABRE for their reservation system and sells (on average) 100,000 tickets a month, is going to pay less per transaction than the airline that sells 10,000 tickets a month.

The airline that has a 401K with Fidelity for its 14,000 pilots, is going to get way better account maintenance fees (often born by the company per a CBA), than the airline that has a 401K for 1,000 pilots.
 
BobDDuck said:
If an airline has 10 airplanes and buys 20 spare tires, they are probably going to be paying more per tire than the airline that has 100 airplanes and buys 200 spare tires.

The airline that uses SABRE for their reservation system and sells (on average) 100,000 tickets a month, is going to pay less per transaction than the airline that sells 10,000 tickets a month.

The airline that has a 401K with Fidelity for its 14,000 pilots, is going to get way better account maintenance fees (often born by the company per a CBA), than the airline that has a 401K for 1,000 pilots.
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You got this figured out. Ever think about starting an airline? :)
 
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