3140 Ch. 7

Question 1

Which two major expenses are most challenging for airlines to manage?

Accepted Answer

Labor and fuel expenses

Question 2

During rush hours, buses and commuter trains in major cities are:

Accepted Answer

Full in one direction and empty on the return

Question 3

No-show rates can sometimes reach as high as:

Accepted Answer

10%

Question 4

What is the implication of a high load factor for airlines?

Accepted Answer

Lower fares due to distribution of costs over a larger number of passengers

Question 5

Which government agency is responsible for investigating all air carrier accidents?

Accepted Answer

National Transportation Safety Board

Question 6

What was the impact of the COVID-19 global pandemic on the U.S. airline market?

Accepted Answer

Stability with four large players: AA, Delta, United Airlines, Southwest

Question 7

If Carrier A offers 6 daily flights and Carrier B offers 3, the competitive advantage of Carrier A is perceived as:

Accepted Answer

More than twice as much as Carrier B

Question 8

In 2020, how many people were employed by U.S. domestic airlines?

Accepted Answer

598,760

Question 9

What is a diseconomy of scale?

Accepted Answer

A situation where costs per unit rise as output increases.

Question 10

Why do many oligopolies result from mergers?

Accepted Answer

To gain a substantial increase in market share/greater economies of scale.

Question 11

Which of the following is a barrier to new entrants in the airline industry?

Accepted Answer

Difficulty obtaining terminal space.

Question 12

How frequently have airlines typically undertaken a re-equipment cycle due to technological advances and competition?

Accepted Answer

Every eight years.

Question 13

Why do some new entrants focus on smaller airports in the same city rather than major airports?

Accepted Answer

To develop niche markets and avoid direct competition.

Question 14

How did Southwest Airlines make a significant mark in online sales?

Accepted Answer

It was the first U.S. airline to reach $1 billion in annual online sales.

Question 15

The marginal cost of serving one more customer on a flight mainly includes:

Accepted Answer

Food, sales commission, incremental fuel burn, and minor expenses

Question 16

How is the economics of offering additional capacity often evaluated?

Accepted Answer

On the basis of marginal cost

Question 17

What is a common characteristic of oligopolistic industries in terms of production?

Accepted Answer

They often have substantial economies of scale.

Question 18

What major role have various government units played in the airline industry?

Accepted Answer

Financing the growth and development of the U.S. airport-airways system.

Question 19

As of 2022, how much was the U.S. scheduled airlines' total assets?

Accepted Answer

Over $100 billion

Question 20

Why do new airline entrants typically have a cost advantage in labor over more established carriers?

Accepted Answer

Outsource functions to service providers with lower wages/fewer benefits

Question 21

Which system provides the most convenient service between the highest number of cities?

Accepted Answer

Airline hub-and-spoke systems

Question 22

In an oligopolistic industry, how do firms generally compete if they maintain constant prices?

Accepted Answer

By engaging in forms of nonprice competition, advertising/customer service.

Question 23

Why does the airline industry produce excessive capacity?

Accepted Answer

Because of the importance of schedule frequency and high fixed costs

Question 24

Given the context, which best defines the term 'hubs' in the airline industry?

Accepted Answer

Airports dominated by one or two major carriers.

Question 25

What factor primarily determines the lower limit of an airline's profitable service price?

Accepted Answer

The airline&#x27;s costs

Question 26

Which airline acquired AirTran in 2010?

Accepted Answer

Southwest Airlines

Question 27

In relation to its total assets, how much did the U.S. scheduled airlines have in flight equipment as of 2022?

Accepted Answer

Over $60 billion

Question 28

Which two airlines merged in 2013 forming the largest airline in the world when measured in offered capacity?

Accepted Answer

U.S. Airways and American/AMR

Question 29

By late 2022, what was the average global jet fuel price per barrel according to IATA?

Accepted Answer

$139.50

Question 30

Which of the following was NOT a result of the Airline Deregulation Act?

Accepted Answer

Strengthened regulations by the CAB.

Question 31

In which year was the Airline Deregulation Act passed?

Accepted Answer

1978

Question 32

What has been a primary influence on the sharp rises in fuel prices for air carriers over the past 15 years?

Accepted Answer

Geopolitical events and global crises

Question 33

What percentage of passengers pay about 30% of the full fare today?

Accepted Answer

Over 90%

Question 34

Why might airlines engage in mergers?

Accepted Answer

Gain > market share, achieve economies of scale, control market price.

Question 35

Which airline tried to introduce a "value pricing" system in the early 1990s?

Accepted Answer

American Airlines

Question 36

What encourages carriers to increase flight frequency despite the availability of seats on existing flights?

Accepted Answer

The impact of departure time changes on passenger buying behavior

Question 37

The number of seats available and the current demand for travel by the public:

Accepted Answer

Rarely mesh at the same time

Question 38

Which airline was absorbed by the newly formed Texas Air in 1986 for $300 million?

Accepted Answer

People Express

Question 39

What enables airlines, like other oligopolists, to achieve economies of scale in production?

Accepted Answer

Utilizing the principle of labor specialization.

Question 40

How does the airline industry react to economic fluctuations?

Accepted Answer

They are slower to recover as spending on air travel is discretionary

Question 41

Which airline filed for bankruptcy in 1982 after overexpanding in the post-deregulation period?

Accepted Answer

Braniff

Question 42

Averages for the peak day of the peak month might be:

Accepted Answer

75%

Question 43

Which of the following is a characteristic of pricing at concentrated gate- and slot-constrained airports?

Accepted Answer

Consistent with economic theory of mutual dependence.

3140 Ch. 7

Questions 43

3140 Ch. 7

Questions 43