Abstract The airline industry is the central part of the commercial aviation value and supply chain. Nevertheless, it has the lowest profit margin and return on investment compared to other sectors in the chain. This leads to the question whether the airline industry is sustainable in the long run, the so called ‘empty core’ problem. This paper discusses the returns in the aviation supply chain and provides several policy recommendations that might be considered to improve the long-run sustainability of the airline sector and the aviation supply chain as a whole. These include i) recognising the role of airline charges for ancillary products and services, which enables airlines to generate revenues to cover fixed costs in the presence of intense competition that drives the price of the core airline product to marginal cost, ii) reconsidering risk allocation between airlines and airports to eliminate pro-cyclical airport pricing required by some regulators or airline-airport agreements, iii) considering allowing airlines to internalise certain externalities, and iv) increasing vertical competition in distribution channels.

    Highlights Airlines are the least profitable segment of the aviation value chain. Financial sustainability of airlines is problematic in the long term. Several strategies might improve sustainability. These include ancillary charges and airline-airport risk redistribution. Also, vertical integration along the value chain and a check on GDS market power.


    Access

    Check access

    Check availability in my library

    Order at Subito €


    Export, share and cite



    Title :

    The aviation value chain: Economic returns and policy issues


    Contributors:

    Published in:

    Publication date :

    2014-01-01


    Size :

    14 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English





    From the Aviation Value Chain to the Aviation System

    Wittmer, Andreas / Bieger, Thomas | Springer Verlag | 2021


    Civil aviation in Scandinavia - economic value and importance

    Brems, C. / Bogelund, M. / Association for European Transport | British Library Conference Proceedings | 2005



    Civil aviation in Scandinavia - economic value and importance

    Brems, C. / Bogelund, M. / Association for European Transport | British Library Conference Proceedings | 2005