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Old 24th Apr 2003, 22:34
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steamchicken
 
Join Date: Mar 2002
Location: Surrey, UK
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I stand by my previous comments about the economics of the A-380. To recap, it is my view that the short-supply resources in modern aviation are those which make up costs per flight as opposed to per pax (per ton for freight dogs). These are (to simplify) ATC services, landing slots, ground handling and the like. Some other factors, like noise restriction and environmental considerations, are constraints but are not usually defined in money, although they are effectively extra costs. (Most major airports distribute slots administratively and through bilateral agreements. The problem of demand rising faster than supply can be adjusted in one of two ways - either by using the current system to ration slots, or by marketising and allowing the price to rise. The difference is only that the cost is implicit in an administrative system - airlines have to forgo profits if no slots are available - but explicit in a market system i.e. the company can obtain the slot, but has to pay upfront. Either way the effect is the same.) Political and environmental considerations mean that the possible number of aircraft movements (the supply of per-flight resources) will be limited for the foreseeable future. Growth in demand for air transport, though, will tend to create growth in demand for movements - obviously.

The squeeze can be dealt with in one of two ways - either let the price of air transport rise until the excess demand is priced out, or put more payload into the limited number of movements - i.e. bigger aircraft. Given that the biggest chunk of the cost of one flight is made up of fixed costs - ones which do not vary with load - it is always going to be efficient to up the load. (as revenue is determined by load x average fare) This is why load factor is important! Increasing the capacity costs - obviously - but I suspect that the cost per-seat rises more slowly than the possible revenue (the principle explains why oil tankers are so gigantic), making for a large economy of scale.
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