Airline planning and management is about the process of profitably matching supply. Within certain constraints, an airline can essentially control demand, which it can influence but cannot control. Low unit costs do not ensure efficiency or guarantee profitability if an airline fails to generate sufficiently high revenues. Nevertheless, controlling and, if possible, reducing costs is a key management objective. As domestic and international markets have become more liberalized, competition, especially price competition, has intensified. In virtually all markets, average yields per passenger-km have tended to drift downward in real terms over time. This has reinforced pressures to reduce unit costs. Two-part question: To what degree can airline management influence and reduce unit costs? Or, are such costs primarily externally determined by factors and developments beyond management control?
