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Rigas Doganis - Flying Off Course: Airline Economics and Marketing (Fourth Edition)

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Rigas Doganis Flying Off Course: Airline Economics and Marketing (Fourth Edition)
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The airline industry presents an enigma. High growth rates in recent decades have produced only marginal profitability. This book sets out to explain, in clear and simple terms, why this should be so. It provides a unique insight into the economics and marketing of international airlines. Flying Off Course has established itself over the years as the indispensable guide to the inner workings of this exciting industry. This enlarged fourth edition, largely re-written and completely updated, takes into account the sweeping changes which have affected airlines in recent years. It includes much new material on many key topics such as airline costs, open skies , air cargo economics, charters and new trends in airline pricing. It also contains two exciting new chapters on the economics of the low-cost no frills carriers and on the future prospects of the industry. The book provides a practical insight into key aspects of airline operations, planning and marketing within the conceptual framework of economics . It is given added force by the authors hands-on former experiences as a Chairman and CEO of Olympic Airways and as a non-executive Director of South African Airways while he is currently a non-executive Director of easyJet.

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Flying off Course

The airline industry presents an enigma. High growth rates in recent decades have produced only marginal profitability. This book sets out to explain, in clear and simple terms, why this should be so. It provides a unique insight into the economics and marketing of international airlines.

Flying off Course has established itself over the years as the indispensable guide to the inner workings of this exciting industry. This enlarged fourth edition, largely re-written and completely updated, takes into account the sweeping changes which have affected airlines in recent years. It includes much new material on many key topics such as airline costs, open skies, air cargo economics, charters and new trends in airline pricing.

It also contains two exciting new chapters on the economics of the low-cost no-frills carriers and on the future prospects of the industry.

The book provides a practical insight into key aspects of airline operations, planning and marketing within the conceptual framework of economics. It is given added force by the authors hands-on former experiences as a Chairman and CEO of Olympic Airways and as a non-executive Director of South African Airways.

Rigas Doganis is a Consultant to airlines and governments, and is a non-executive director of easyJet and Hyderabad Airport. He is the author of The Airline Business and The Airport Business, also published by Routledge.

Flying off Course

Airline economics and marketing

Fourth edition

Rigas Doganis

Flying Off Course Airline Economics and Marketing Fourth Edition - image 1

LONDON AND NEW YORK

First published 1985
by HarperCollins Academic

Second edition 1991

Third edition 2002

Fourth edition 2010
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Simultaneously published in the USA and Canada
by Routledge
270 Madison Avenue, New York, NY 10016

Routledge is an imprint of the Taylor & Francis Group, an informa business

This edition published in the Taylor & Francis e-Library, 2009.


To purchase your own copy of this or any of Taylor & Francis or Routledges collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.

1985, 1991, 2002, 2010 Rigas Doganis

All rights reserved. No part of this book may be reprinted or reproduced
or utilised in any form or by any electronic, mechanical, or other
means, now known or hereafter invented, including photocopying
and recording, or in any information storage or retrieval system,
without permission in writing from the publishers.

British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data
Doganis, Rigas.
Flying off course : airline economics and marketing /
Rigas Doganis. 4th ed.
p. cm.
Includes bibliographical references and index.
1. Aeronautics, Commercial. 2. Aeronautics, CommercialMarketing.
3. Airlines. 4. AirlinesMarketing. I. Title.
HE9780.D64 2009
387.71dc22 2009023298

ISBN 0-203-86399-2 Master e-book ISBN

ISBN 10: 0-415-44736-4 (hbk)

ISBN 10: 0-415-44737-2 (pbk)

ISBN 10: 0-203-86399-2 (ebk)

ISBN 13: 978-0-415-44736-2 (hbk)

ISBN 13: 978-0-415-44737-9 (pbk)

ISBN 13: 978-0-203-86399-2 (ebk)

Contents
Figures

1.1

Annual net profit or loss as percentage of total revenue of ICAO member airlines, 19802008

1.2

Average rate of return on invested capital in Aviation Supply Chain (19962004)

1.3

Trends in unit revenues, US and European network airlines, 19912007

4.1

Average fuel price in current and constant 1987 US cents: 19802008

4.2

British Airways costs in terms of escapability, 20078

5.1

Airport charges for a Boeing 747400, December 2008 (US dollars)

5.2

The impact of aircraft size on aircraft direct operating costs, US airlines in 2007

5.3

Payloadrange diagrams for two versions of the Airbus A340

5.4

Payloadrange, productivity and cost relationship

5.5

Impact of sector distance on block time and block fuel

5.6

Impact of sector distance on fuel burn Airbus A321200 on routes from London

5.7

Impact of sector distance on unit costs for Airbus A321 on routes from London

5.8

Impact of sector distance and aircraft size on unit costs: Airbus A320200 and Airbus A340600 on routes from London

6.1

Low-cost airline seats as a percentage of total scheduled seats on domestic and intra-European routes to/from each country, September 2008

6.2

Unit costs of European network airlines compared to easyJet and Ryanair on intra-European services, 2005

6.3

Comparing unit costs of European network and low-cost airlines, 19972005

8.1

Market segmentation by trip purpose and passenger needs

8.2

Annual changes in world gross domestic product compared to changes in revenue passenger-kms, 1970 to 2006

9.1

Types of traffic growth

11.1

Unit cost, yield and load factor trade-off

11.2

Interplay of demand curve and pricing strategies

Tables

1.1

Operating results selected airlines, financial year 2007

1.2

Impact of technological advance on aircraft productivity

1.3

Fuel price escalation deepens in 20018 downturn

1.4

Regional distribution of international scheduled traffic

1.5

Distribution of traffic and revenue on scheduled services of worlds airlines, 2007

1.6

Traffic mix on international scheduled passenger and all cargo services in 2007

3.1

Key features of traditional and post-1978 open market bilaterals

3.2

US open market and post-1991 open skies air services agreements

4.1

The impact of non-operating items on financial results the SIA case in 20067

4.2

Traditional categorisation of airline operating costs

4.3

Trends in structure of costs scheduled airlines ICAO member states, 19942007

4.4

Contrasting cost structure of long- and short-haul airlines, financial year 2007

4.5

Cost structure based on fixed and variable direct operating costs

5.1

Unit operating costs of major international airlines, financial year 2007

5.2

Factors affecting airline operating costs

5.3

Average jet fuel prices by region: mid-August 2008

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