Ware House

In: Business and Management

Submitted By monirruet
Words 763
Pages 4
Case on- US Airways Cost Structure
US Airways Corporation (formerly US Air) was formed with the merger of several diverse regional airlines including Allegheny Airlines, Mohawk Airlines, Lake Central Airlines, Pacific Southwest Airlines and Piedmont Airlines. The mergers that ultimately led to the establishment of US Airways did not come without difficulties.
US Airways possesses a diverse fleet of aircraft, unlike the much more successful Southwest Airlines, which flies only one type of plane, the Boeing 737. US Airways’ diversity results in higher costs of maintenance and crew training and in a much more complex crew scheduling problem.Because of the traditionally week competition in its Northeast market stronghold, US Airways had the highest yield in the airline industry in 1993.
The combination of high yields and very high costs per available seat mile invited competition. With the cloud of a potential bankruptcy hanging over it, US Airways looked for ways to control its costs in order to restore its financial health. Cost control is a difficult problem in any corporation. It is, however, especially difficult in a capital-intensive industry such as this.

Case on- Rising Marginal Cost of 747s
Boeing and Airbus provide all the wide-bodied jets the world needs. Boeing 747, 767 and 777s typically have a 60-70 percent share of the worldwide market, but Airbus accepted the majority of the new orders in 1994-1995 and doubled their output rate from 126 to 232 planes per year. Eventually incremental variable costs must rise as designers and shop floor get congested with new instructions and new diagrams.
Alternatively a company like Boeing can secure a 40% increase in the production rate of final assembly by contracting out more sub-assemblies. In the late 1990s, wide body prices did not rise because of intense competitive pressure from Airbus, but the marginal…...

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