Identify the major cost categories of airlines

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Reference no: EM133299448

Question: IATA issued the following statement in October 2020: "The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can't cut costs fast enough to catch up with shrunken revenues," said Alexandre de Juniac, IATA's Director General and CEO. Although airlines have taken drastic steps to reduce costs, around 50% of airlines' costs are fixed or semi-fixed, at least in the short-term. The result is that costs have not fallen as fast as revenues. For example, the year-on-year decline in operating costs for the second quarter was 48% compared with a 73% decline in operating revenues, based on a sample of 76 airlines."

(a) Differentiate fixed and semi-fixed costs from an airline perspective and discuss the impact of having high fixed and semi-fixed costs during the Covid-19 pandemic.

(b) Identify the major cost categories of airlines and examine the possibilities for airline managers to manage these cost categories.

Reference no: EM133299448

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