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Questions and Answers
What type of commodities are typically not transported by air carriers?
Which of the following is an advantage of air carriers?
Which mode of transportation do airlines most closely compete with for higher-valued manufactured goods?
What percentage of revenues in the airline industry comes from passenger transport?
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What best characterizes the competition among air carriers?
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Why are air carriers not suitable for transporting basic raw materials?
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What is the primary service competition factor among airlines?
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Which of the following costs represents the largest portion of airlines' operational expenses?
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Which characteristic primarily distinguishes air transportation from other modes?
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What is the breakdown of the cost structure for airlines regarding variable and fixed costs?
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What is the primary characteristic of for-hire air carriers?
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How are major air carriers classified in terms of revenue?
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Which of the following is an example of a service offered by for-hire carriers?
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What is a primary reason for the small number of large carriers in the airline industry?
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What is the main purpose of private air carriers?
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What type of cargo is predominantly transported by air services?
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What is one regulatory requirement for private carriers?
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Why are air freight costs considered inconsequential for emergency shipments?
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Study Notes
Types of Carriers
- For-hire Carriers are companies that provide transportation services to the public in exchange for a fee.
- Types of for-hire carrier services include: all-cargo, air taxi, commuter, charter and international.
- For-hire Carriers can be categorized by revenue:
- Majors have annual revenues exceeding $1 billion.
- Nationals generate between $75 million and $1 billion in annual revenue.
- Regionals have less than $75 million in annual revenue.
- Private Carriers haul goods or passengers primarily for their own company.
- Private carriers are often used to transport company personnel or emergency freight.
- Although rare, some private carriers transport freight routinely.
- The FAA (Federal Aviation Administration) regulates private carriers.
Number of Carriers
- The airline industry features a small number of large carriers.
- This structure is due to the significant capital outlays required to enter the airline business, which acts as a barrier to entry.
Market Structure (Commodities Hauled)
- The majority of freight shipped by air is high-value or emergency shipments.
- Air transportation costs are insignificant compared to the costs of delaying emergency shipments.
- Air freight costs are a small percentage of the value of emergency goods.
Commodities Hauled
- Examples of air freight include: mail, clothing, communication products, photography equipment, mushrooms, fresh flowers, high-priced livestock, racehorses, industrial machines, expensive automobiles, and jewelry.
- Basic raw materials like coal, lumber, iron ore, are typically not transported by air.
- The high value of these products makes it more cost-effective to transport them via other modes.
- Air carriers mainly transport low-volume, high-value, and emergency goods.
Competition
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Intermodal competition: Though air carriers have a unique service offering, their competition from other modes for both passengers and freight is limited.
- Air carriers excel in providing time-sensitive, long-distance movement of people or freight.
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Intramodal competition: Intense competition exists among air carriers in terms of rates and service, even though the number of carriers is small.
- Competition in air service manifests in various ways, but the primary service competition is the frequency and timing of flights on a route.
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Other modes compete with air carriers to some extent:
- Motor carriers compete for higher-valued manufactured goods.
- Automobiles compete for passenger transportation.
- Trains and buses compete for passenger transportation, but to a lesser extent.
General Service Characteristics
- Passenger transport accounts for 73% of air carrier revenue.
- Freight transportation represents about 10% of air carrier revenue.
- The remainder of revenue comes from emergency shipments.
- Air carriers typically transport high-value, perishable, or emergency cargo.
Speed
- The major service advantage of air transportation is its speed.
- Terminal-to-terminal time via air transportation is shorter than any other mode.
Capacity
- Air carriers primarily move small, time-sensitive shipments.
Cost Structure
- Air carriers have a high variable cost structure and low fixed costs:
- Approximately 80% of air carrier costs are variable, while 20% are fixed.
- Governments own and operate air carrier terminals.
- Landing fees are variable costs that are paid to use the terminals.
- Labor represents over 1/3 of total operating expenses.
- Fuel accounts for approximately 10% of operating costs.
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Description
This quiz covers the classification of carriers in the aviation industry, including for-hire and private carriers. Learn about different types of for-hire services and their revenue categories, as well as the regulations governing private carriers. Test your knowledge on this crucial aspect of air transportation.
