Abstract
The aim of this study is to investigate whether the size of airline operations has any statistically significant effect on the costs of its aircraft maintenance. By investigating the impact of the extent of operations on unit costs of carriers, it was inspected the existence of economies of scale in providing maintenance services. Through an econometric model of maintenance costs, it was estimated the influence of key drivers such as the aircraft average stage length, aircraft size and load factors. It was performed an application to the Brazilian airline industry. The empirical model makes use of a Fixed- Effects Estimator (FE), using a four-dimensional panel data of flight segments, carriers and equipment over a period of ten years. Results showed support for the hypothesis of scale economies in maintenance services. The academic gain of this article is through econometric analysis identify factors that influence the maintenance costs for airlines. Noting that the largest companies have lower maintenance costs (economies of scale), enables administrators and air planners a better understanding of the phenomenon, as well as a better use of the resources available. For smaller companies, outsourcing or sharing of maintenance with other companies, can result in major savings and profitability.
Highlights
The objective of this study is to investigate if there is any support for an inverse relation between the size of a company and its unit cost of maintenance services in the airline industry
It is necessary to make further hypothesis for the evolution of the variables because the GDP have forecasts made by the Central Bank, the average length, flight hours can be extrapoled from the predictions of airline demand and the load factor, and aircraft size was assumed constant
It can be appreciated a different scale of increasing, the unitary costs should be decreasing as the quantity don’t increase at the same ratio as the costs, the size of the served net allow network carriers to benefit from differentiated location costs, the maintenance being one of them
Summary
The objective of this study is to investigate if there is any support for an inverse relation between the size of a company and its unit cost of maintenance services in the airline industry. As the extent of operations of a carrier increases, economies of scale are expected to produce lower unit costs, especially for in-house maintenance. This effect may be observed in vertical relations between suppliers and contractors, as bigger companies may have a more efficient negotiation power in case of maintenance contracts.
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