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Category:2001 softwareDoes the Market Require Wireless Airline Passengers?
By LITIGATION SPECIALIST
The average cost of a United Airways flight: $246.
Ask any pilot why the last 40 years of air travel have evolved as they have and they'll tell you the market has demanded it. But ask them what the market is demanding, and they'll have to consult their latest forecast.
Most of the research and analysis in the airline industry seems to be looking backward, searching for an explanation to why travel habits have changed since 9/11. The common explanation is that all the passengers were too traumatized to travel. Or that the introduction of free in-flight entertainment brought about a mass exodus from premium cabin seats and demand for lounges, and the only way to get business travelers to the back of the plane was to lower the standard premium seat.
But what if the situation really is that the market demands lower fares?
Many industries produce what we call "fixed" costs of production. These are the costs that you spend regardless of whether you produce more or fewer of something. These fixed costs represent things like your labor, raw materials, management, property, and finance. In the airline industry, these fixed costs include things like the cost of fuel, food, maintenance, your pilots, and the ground crew. And then there's the variable cost, which is what you need to make more or less of something. This variable cost is labor, aircraft, and your own time.
Most businesses like to call these fixed costs "cost of goods sold" and the variable costs are called "operating expenses." They're two sides of the same coin. What we're interested in when we talk about the market we're in is the comparison between these two coins. For example, if the average cost of a seat on a United Airlines flight was $246, there were 23.7 seats sold for the
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