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1) The Porter Five Forces Model is widely used to assess the potential profitability of an industry. Discuss how the emergence of low-cost-carriers such as Southwest Airlines and Ryanair is incorporated in the model and the implication for airline industry profits.

2) One of the most challenging tasks for the airline manager is matching demand and supply (capacity). What characteristics of air travel demand make this so difficult?

3) Airline passengers are broadly segmented by purpose of travel. Characterize the two major segments by price elasticity of demand. What is the implication for the price each segment will pay for air travel?

4) Define economies of scale. Are economies of scale evident in the airline industry? What is the implication for market entry?

5) Airline unit cost is typically measure by cost per available seat mile or kilometer (CASM, CASK). How does aircraft size affect CASM? For ex, does the Airbus 380 or a regional jet have lower CASM?

Microeconomics, Economics

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