AE 413 - MODULE 3

AE 413 - MODULE 3

by Engr. Jahaziel Vargas-Herrera

​Economic Characteristics of the Air Transportation

Homogeneous Products

• The product is essentially identical regardless of which company makes it.

• Example: Crude oil, steel, cement.

• In these markets, customers don’t really care who made it — they just look for the lowest price.

• Oligopoly effect: Since products are the same, companies often compete mainly on price and efficiency.

Differentiated Products

• The basic product is similar, but companies add features, branding, or services to make theirs stand out.

• Example:

  • Cars: All get you from point A to B, but each brand adds style, features, technology, and image.

  • Airlines: All sell seats on planes, but they differ in service quality, seat comfort, in-flight meals, loyalty programs, and branding.

• Oligopoly effect: Competition shifts toward non-price competition — like advertising, service quality, and extra perks — rather than pure price wars.

Where do airlines fit?

OLIGOPOLY

Airline Industry as an Oligopoly

• Why airlines fit:

  • Few dominant carriers

  • Huge capital needed to start

  • Limited airport gate/slot availability

  • Hub dominance

• Example: In NAIA (Manila), a few airlines control most gates; new entrants struggle to get prime slots.

What is an Oligopoly?

• A market with a small number of large firms dominating the industry.

• Key traits:

  • Few competitors, each holding a significant market share

  • High barriers to entry (cost, infrastructure, technology, regulation)

  • Mutual interdependence — each firm considers rivals’ likely reactions when making decisions

  • Can produce either homogeneous (e.g., oil, steel) or differentiated products (e.g., cars, airlines)

Why it matters for airlines?

• The “seat on a plane” is the homogeneous part — it gets you from origin to destination.

• But the “experience” (comfort, amenities, schedule frequency, brand reputation) is the differentiated part, and that’s where airlines try to win customers without slashing fares.

​Economists usually describe the certificated airline industry as closely approximating an oligopolistic market structure

THE AIRLINES AS OLIGOPOLISTS

• ​​An oligopoly is a market dominated by a few large firms (each with significant market share).

• These firms often offer similar or slightly differentiated products (e.g. airlines all provide air travel).

​​1.Number of Carriers and Market Share

• ​The airline industry, with its small number of companies and concentration of market share, meets the first characteristic of oligopolist firms.

• Philippine Example: In the Philippines, only a few carriers control most of the market – notably Philippine Airlines (PAL), Cebu Pacific, and AirAsia Philippines

Market Share Concentration

This pie-chart style distribution shows an oligopoly in action – a few big slices dominate the pie.

2. HIGH BARRIERS TO ENTRY

​Huge Startup Costs: Entering the airline business is extremely difficult. A new airline must buy or lease expensive aircraft, hire and train crews, and obtain licenses – requiring huge capital investment

• Limited Slots & Permissions: Even if you have planes, you need permission to fly in and out of major airports. Take-off and landing slots at airports are scarce and tend to be controlled by established airlines, making it hard for newcomers to find. Regulations and safety requirements add further hurdles.

• These high entry (and exit) barriers mean new competitors are rare, so the same few airlines stay on.

• It’s a “no entry” sign for most aspiring airlines.

3. ECONOMIES OF SCALE

• ​Lower Cost per Seat: Big airlines benefit from economies of scale – spreading costs over many passengers.

• For example, a larger aircraft full of travelers can reduce the cost per seat. Operating a high-density fleet and filling planes helps lower the average cost

• ​Competitive Edge: Because of these scale efficiencies, the major carriers can offer lower fares or survive on thinner margins than a small airline. This makes it tough for small entrants (with higher costs per seat) to compete.

• Example: Cebu Pacific’s strategy of flying many passengers on each plane in a single-class configuration is a scale economy in action (lower cost per passenger) Big fleets + many routes = cost advantage.
  

3. MERGER AND CONSOLIDATION

• Growing by Merger: Oligopolies often get more concentrated. Major Philippine carriers have merged with or acquired smaller airlines to expand. This creates even larger airlines and fewer competitors.

• Examples: Cebu Pacific acquired Tigerair Philippines in 2014, absorbing its routes and fleets.

• Likewise, AirAsia Philippines merged with Zest Airways, folding it into AirAsia’s operations.

• These mergers turned previously separate competitors into one, boosting the market share of the acquiring airlines.

Effect:

• Mergers reinforce the oligopoly – the big players get bigger.

• Fewer independent airlines remain, and the dominant firms can coordinate or compete even more effectively with their increased size.
  
  

4. MUTUAL DEPENDENCE

• Interdependent Decisions: In an oligopoly, each airline must watch its rivals closely. The Philippine carriers are in constant rivalry but also mutual dependence. If one airline makes a move, others feel it.

• Price Moves Trigger Responses: For instance, if one airline cuts ticket prices, the others will quickly react – often by cutting fares as well – to avoid losing passengers. No airline can afford to ignore a competitor’s change. Similarly, if one raises prices, it risks losing customers to the others unless they all follow.

• ​“Follow-the-Leader” Dynamics: This interdependence means strategic decisions (fares, routes, promotions) are often matched or countered by competitors. The airlines are essentially linked by their competitive actions – one’s gain or loss is heavily influenced by the others’ responses.
  
  

5. PRICE RIGIDITY & NON-PRICE COMPETITION

• Sticky Prices: Airfares in an oligopoly tend to be stable or move together. Airlines are reluctant to drastically change prices on their own.

• A big price drop would likely be matched by rivals (leading to a price war with lower profits for all), and a price increase would drive passengers to competitors. So, fares often stay similar across the big carriers – this is price rigidity.

• Avoiding Price Wars: Because aggressive price cuts hurt everyone’s profits, airlines often prefer not to compete purely on price. Instead, competition takes other forms – non-price competition.

• ​Competing on Service: Philippine airlines differentiate themselves through promos and seat sales, frequent-flyer programs, better in-flight services, baggage perks, and more convenient flight schedules rather than permanently lowering base fares.

• For example, one airline might offer free baggage or meal upgrades, while another emphasizes on-time performance or customer service – all ways to win customers without undercutting fares.
  
  

6. GOVERNMENT ROLE

• Regulation and Oversight: The government plays a big part in the airline industry’s structure. In the Philippines, agencies like the CAB & CAAP regulate air travel. They may control routes, safety, and even fares on certain routes to prevent consumer exploitation.

• For example, if only one airline serves a remote route, the government can cap the fare to protect travelers.

• Protecting Local Carriers: The Philippine government historically shielded its airlines from too much competition. Foreign airlines are not allowed to operate domestic flights (cabotage is banned), ensuring Philippine carriers face no foreign rivals on local routes.

This policy keeps the domestic market an exclusive club of local oligopolists.

• ​Infrastructure & Support: The government also provides critical infrastructure – it builds and upgrades airports, air traffic control systems, etc.

• Major projects (like new terminals or provincial airports) make expansion possible for the airlines.

• Government policies (e.g. airport slot allocation, air service agreements with other countries) can favor incumbents or encourage new players, thereby influencing how the oligopoly evolves.
  
  

7. HIGH TECHNOLOGY TURNOVER

​​The airline industry experiences rapid technological change, with new aircraft models offering better performance, efficiency, and capacity introduced regularly. This results in a high turnover of technology and frequent fleet renewal cycles.

• Constant Fleet Upgrades

  •   Every few decades (or even more frequently now), a major leap in aircraft technology occurs.

  • Airlines must invest billions to replace aging fleets with newer models to remain competitive in fuel burn, capacity, and passenger comfort.

  • Example: Replacing a 1990s-era fleet with new-generation aircraft in the 2010s.

• Training & Infrastructure Costs

  • New aircraft require pilot and crew retraining on advanced systems (e.g., analog → digital cockpits).

  • Airports and maintenance facilities must be updated to accommodate larger or different aircraft types.

• Pressure on Smaller Carriers

  • Smaller airlines struggle to afford these upgrades, keeping older, less efficient planes.

  • Older aircraft = higher fuel and maintenance costs → weaker competitiveness.

8. LABOR AND FUEL COST

​Do you know the biggest costs for airlines?

 

​

​Source : IATA site - World Air Transport Statistics (WATS)

• Cost Structure: Two costs dominate airline finances: fuel and labor. Jet fuel to keep planes flying, and the pilots, crew, and staff who operate the airline. Together, fuel and personnel can account for roughly half (or more) of an airline’s operating expenses. (For example, in one analysis fuel was about 20–30% of costs and labor around 30% – combined ~50+%).

• Profit Squeeze: Because these costs are so high, spikes in oil prices or increases in salaries directly cut into profits. Philippine airlines, like others worldwide, face this pressure: if fuel prices jump, airlines must decide whether to absorb the cost (hurting profit) or pass it to passengers via higher fares (which can hurt demand). The oligopoly might all raise fares together if fuel costs soar.

• ​Efficiency Focus: Big airlines try to mitigate these costs by using fuel-efficient aircraft and optimizing staffing. But ultimately, controlling labor and fuel expenses is key to staying competitive. They know that about every other peso they earn will go right back out for jet fuel or paychecks, so managing these large cost components is a constant concern.
  

9. FLIGHT FREQUENCY ADVANTAGE

• More Flights = More Convenience: They can schedule multiple flights per day on popular routes, whereas a smaller airline might only manage one flight daily. Having more departures gives passengers flexibility – a huge selling point for business travelers and tourists alike.

• Market Coverage: Frequent flights help capture demand.

• The Philippine giants leverage this by flying often to major cities and tourist spots, making it hard for a tiny new airline to steal market share with infrequent service.

• ​Slot Dominance: This advantage is self-reinforcing – incumbents hold many airport slots, so they maintain their dense schedules. New entrants struggle to find viable times to fly.

• In essence, the big airlines crowd the timetable with their flights, locking in customer loyalty and leaving would-be competitors little room to squeeze in.

10. EXCESS CAPACITY

• Empty Seats = Lost Revenue: Airlines cannot perfectly match supply to demand, and they often end up with excess capacity (especially in slower seasons or new routes).

• An unsold seat on a flight is revenue that’s gone forever once the plane takes off. Because an airline’s costs for that flight are largely fixed (fuel, crew, etc. are paid regardless), any empty seats mean lower average revenue per seat.

• ​Airlines sometimes over-schedule or use bigger planes than necessary, leading to this situation of extra capacity.

• High Fixed Costs: Oligopolistic airlines might keep flying routes or maintaining capacity even if not all seats fill, to maintain market presence or deter competitors. They accept some empty seats.

• However, they try to minimize the waste: techniques like overbooking and last-minute discounts are used to fill as many seats as possible.

• Since the marginal cost of adding a passenger is low, selling a cheap ticket to occupy an otherwise empty seat is better than no ticket at all.

• ​Break-Even Load Factor: Typically, an airline needs a certain load factor (percentage of seats filled) to break even.

• For example, they might need around 65% of seats occupied just to cover costs on a flight transport.

• In good times, Philippine carriers often fly 80%+ full. But during weak demand, planes might go half-empty – a sign of excess capacity that hurts profitability.

• They then face a tough choice: keep flying (and absorb losses) or cut routes/flights (and give up market share).
  

11. ECONOMIC SENSITIVITY

• Cyclical Demand: Air travel is highly sensitive to economic conditions. In an oligopoly, all the major airlines feel the pain when the economy slows or shocks happen.

• Fewer people fly during recessions or crises, so passenger volumes drop. Conversely, in boom times, more people can afford to travel, and airlines see demand surge.

• The fortunes of Philippine airlines rise and fall with the broader economy (tourism trends, OFW travel, business activity, etc.).

• Impact of Shocks: A clear example is the COVID-19 pandemic. In 2020, air travel ground to a halt — Philippine airlines experienced an unprecedented demand collapse.

• Even years later, recovery is ongoing: 2023 passenger traffic was still only about 84% of the 2019 (pre-pandemic) level, showing the lasting impact of the downturn.

• ​Response: During economic downturns, airlines in an oligopoly typically cut costs and capacity. They might park aircraft, lay off staff, or defer expansion to survive the lean times transport.

• Because fixed costs are so high, they have to act fast when revenue plummets. On the flip side, when the economy improves, the big players are positioned to ramp up flights again and capture the returning demand. They ride the economic rollercoaster together – each large airline’s health is a barometer of the overall industry climate.
  
  

THE SIGNIFICANCE OF AIRLINE PASSENGER LOAD FACTORS​

LOAD FACTOR

It is the percentage of available seats that are actually filled with paying passengers.

• It measures how efficiently an airline uses its seating capacity.

• Important because ~65% of airline costs remain the same regardless of passenger numbers — higher load factor spreads those costs over more passengers, lowering cost per passenger.

Example:
In 2023, Cebu Pacific reported a load factor of about 84% during peak summer months — meaning most flights were nearly full.

Manila, 18 July 2023- The World’s Best Low-Cost Airline has registered a 92% load factor from January to June 2023, registering a higher number of passengers who flew with the airline this year versus pre-pandemic records of 91% during the same time period.  AirAsia Philippines also recorded a load factor of 94% for the first 15 days of July which is higher compared to the same pre-pandemic period figure of 88%.

​WHY LOAD FACTOR MATTERS?

• High load factor = Lower costs per passenger → possible lower fares and better profitability.

• Low load factor = Higher cost per passenger → risk of losses if fares don’t cover costs.

• Airlines track it daily, monthly, and yearly to plan routes, schedules, and fares.

• RP = ​REVENUE PASSENGER

• ​RPK = ​REVENUE PASSENGER X KILOMETER

• ​AS = AVAILABLE SEATS

• ​ASK = AVAILABLE SEATS X KILOMETER

• ​LF = LOAD FACTOR

• ​PROFIT = REVENUE - COST

EXAMPLE:

• ​DISTANCE - 567 Kilometers

• ​Aircraft - A320

• Number of ​Seats - 150

• ​Number of Revenue Pax - 125

• ​Number of FOC - 3 (Not revenue pax)

• ​Average Ticket Price per pax - Php 3,900

• Total Operating Cost​ - Php 330,000

​

CALCULATE:

• ​Load Factor

• ​Profit

RP = ​REVENUE PASSENGER

​ = PAX = 125

RPK = ​REVENUE PASSENGER X KILOMETER

​= RP X KM = 125 X 567

​AS = AVAILABLE SEATS

​= SEATS = 150

​ASK = AVAILABLE SEATS X KILOMETER

​= SEATS X KM = 150 X 567

​LF = LOAD FACTOR

​= RPK/ASK = RP/AS

​=(125 x 567) / (150 x 567) = 125/150 = 83.33%

​PROFIT = REVENUE - COST

​= (125 x P 3,900) - P 330,000 = P 157,500

• ​A high load factor indicates that an airline has full planes with most seats occupied by passengers.

• Airlines have high fixed costs associated with each flight. Every flight must have a full flight crew and support staff, a well-maintained aircraft with enough fuel, and services that entertain and comfort customers.

• ​​If only half of the seats on a flight are occupied, the airline is not generating as much revenue as it could by flying a full plane.

• Lower Price

• ​Promotion/ Advertisements

• ​Change Capacity

​1. TRAFFIC PEAKS & VALLEYS

• ​The idea is all transportation modes must operate during the traffic peaks and valleys in order to meet the public need

• Airline load factors are seasonal

• Daily and hourly load factors fluctuate even more

• Thus, airliner must make sure there are sufficient flights during peak hours

• But sometimes, airline has to provide positioning flights to cater the load for peak hours

• Positioning flights: Aircraft has to flown virtually empty from one city to another late at night or early in the morning to have the plane ready to meet rush-hour demand.

​Example: A late-night Cebu–Manila flight with only 30 passengers, so the plane can operate the 6:00 AM Manila–Hong Kong flight.

• Demand varies by time of day, week, and season.

• Peak seasons (High Load Factors):
  – December holidays (Christmas, New Year)
  – Holy Week (March/April)
  – Summer break (April–May)

• Off-peak (Low Load Factors):
  – Rainy season months like August–September.

• Example:
  – Flights to Boracay are packed during Christmas & summer, but may fly half-empty in September.

2. CAPACITY VS DEMAND

• ​Airline demand is cyclical: depends on time of day, season, and economy.

• Airlines can’t perfectly match seat supply to fluctuating demand because capacity is added/removed in whole aircraft, not individual seats.

• Frequency can be adjusted, but only within limits.

• Example:
  Cebu Pacific can’t just remove 20 seats from an A320 if demand drops — they either fly the whole plane or cancel a flight.

Pricing in Relation to Load Factor

• One approach that carriers have used quite extensively over the years to improve load factors is off-peak pricing.

• Airlines use promotional fares to fill seats during low-demand periods.

• Extra passengers add little cost but boost revenue.

Pricing in Relation to Load Factor

• Cost-Plus Pricing – fares set by adding a markup to costs

• Price Discrimination (Yield Management) – charging different fares to maximize revenue (charging different fares for the same seat class depending on timing, demand, and passenger type)

• Penetration Pricing – low fares to quickly gain market share

• Price Skimming – high initial fares, lowered over time

• Unbundling & Ancillary Revenue – low base fare with add-on fees (bags, seats, meals)

• Bundled Pricing – all-inclusive fares with services included

• Predatory Pricing – pricing below cost to drive out competition

​Different Types of Price Discrimination

First-Degree Price Discrimination (Perfect)

• Definition: Charge each customer the maximum price they are willing to pay.

• Effect: No consumer surplus (airline keeps all the value).

• Example (theoretical in airlines): If PAL somehow knew Juan is willing to pay ₱12,000 for a Manila–Tokyo ticket, they charge him ₱12,000.

• Reality: Hard to implement because it requires knowing every traveler’s exact willingness to pay. Mostly exists in negotiation-heavy industries (auctions, consultancy).

Second-Degree Price Discrimination (Indirect)

• Definition: Prices vary depending on choices or behavior of the consumer (not their identity).

• Mechanism: Firms design pricing options, and consumers “self-select.”

• Examples in Airlines:

  • Early-bird promos vs. last-minute fares.

  • Buying in bulk (roundtrip or group discounts).

  • Economy vs. Premium Economy vs. Business (same plane, different amenities).

  • Promo fares requiring extra effort (e.g., Piso Sale only available online during certain hours).

Third-Degree Price Discrimination (Direct)

• Definition: Prices differ for distinct groups of consumers.

• Examples in Airlines:

  • Student discounts or senior citizen fares.

  • Cheaper off-peak flights (Tuesday morning) vs. expensive peak slots (Friday night, holidays).

  • Residency-based fares (local residents sometimes pay less than foreign tourists).

​Without price discrimination, the firm charges one price Php 7 * 100 = Php 700 revenue

​

WIth price discrimination, the firm can charge two different prices:

• Php 10 * 35 = Php 350

• Php 4 * 120 = Php 480

Total revenue = Php 830. Therefore, the firm makes more revenue under price discrimination.

​FUEL CONSUMPTION OPTIMIZATION

​FUEL CONSUMPTION AS A CHALLENGE

• Fuel is the largest variable cost in airline operations — sometimes accounting for up to 30–40% of expenses.

  This creates a double challenge:

  • Financially, higher fuel costs drive up operating costs, which often means higher ticket prices and reduced demand.

  • Environmentally, more fuel burn means more CO₂ emissions, worsening climate change.

• For example, even a 10% increase in oil prices can significantly impact airline profitability. Clearly, optimizing fuel use is not optional — it’s essential.

​FUEL CONSUMPTION OPTIMIZATION

• ​Aircraft Technology and Design

• ​Aviation Operations and Infrastructure

• ​Socioeconomic and Policy Measures

• Alternative Fuels

Aircraft Technology and Design

• One key area for optimization is aircraft technology and design.

  Fuel efficiency depends heavily on three factors:

  1. Structural weight – lighter aircraft use less fuel. Modern planes use carbon-fiber composites to cut weight.

  2. Aerodynamics – better wing design improves lift-to-drag ratio, lowering fuel burn.

  3. Engine efficiency – newer engines achieve lower thrust-specific fuel consumption.

  For example, the Boeing 787 Dreamliner is about 20% more fuel-efficient than older models, thanks to composites and advanced engines.

  This shows how engineering innovation directly saves fuel and money.

Aviation Operations and Infrastructure

• Technology alone is not enough. How airlines operate their aircraft also plays a major role.

• Operational improvements include:

  • Increasing load factor — filling more seats spreads fuel costs across more passengers.

  • Optimizing speed, altitude, and weight to minimize unnecessary fuel burn.

  • Reducing taxi times and auxiliary power use on the ground.

  • Using advanced flight-planning systems to take advantage of winds and efficient routes.

• For instance, Continuous Descent Operations (CDO) — where planes glide down gradually instead of stair-stepping — can save up to 500 kg of fuel per flight.

• Airport infrastructure and air traffic management matter too. Efficient runways, reduced congestion, and optimized airspace routes all cut wasted fuel.

• Traditional: Steps down with level-offs → less efficient, more fuel burn.

• CDO: Smooth glide down → fuel-efficient.

• OPD: Similar to CDO but tweaked to fit ATC/airspace constraints → still smooth, but with slight adjustments.

Socioeconomic and Policy Measures

• Fuel consumption is also shaped by social awareness and government policies. When the public understands the environmental cost of aviation, it pressures governments to act.

  Policy tools include:

  • Carbon taxes or fuel taxes

  • Emissions trading schemes

  • Regulations on efficiency and emissions

• A good example is the EU Emissions Trading System, which requires airlines to pay for their carbon emissions.

• These measures encourage airlines to adopt greener technologies and smarter operations.

• The key is balance — introducing these policies gradually so both airlines and consumers can adapt.

Alternative Fuels

• Since the 1970s energy crises, researchers and airlines have studied biofuels and synthetic fuels. Today, Sustainable Aviation Fuel (SAF) is emerging as a game-changer.

• SAF can be made from waste oils, plants, or even algae, and can reduce emissions by 60–80% compared to regular jet fuel.

• The best part? It can be used in current aircraft without major modifications.

• The challenge is scalability — production is still expensive and limited. But as demand grows, costs will fall, and SAF could become a major part of aviation’s future.

• ​From Narita to Manila, Flight 5J 5055 became the first Philippine carrier to use SAF from Japan, operated on an Airbus A321neo with a 40% SAF blend.

• The result? 44% fewer CO₂ emissions per passenger — a new record for Cebu’s sustainable aviation journey.

AIRLINE OUTSOURCING

• Today’s airline industry faces intense competition, rising costs, and the need to constantly improve efficiency.

• Outsourcing has become a key strategy to deal with this.

• By outsourcing non-core functions, airlines can focus on what they do best — flying passengers safely and profitably.

• The idea is simple: let specialists handle support work, while the airline concentrates on its core mission.

What is Outsourcing?

• Outsourcing is when a company transfers certain activities to an outside provider instead of doing them in-house.

• In the airline context, this means activities that are necessary but not unique to the airline experience.

• For example, maintenance, catering, or ground handling. The goal is always the same: reduce costs, increase efficiency, and allow management to focus on core competencies.

Features of Outsourcing

• Outsourcing isn’t just a quick fix — it’s a long-term management strategy. It:

  1. Maximizes use of financial resources.

  2. Saves time and boosts efficiency.

  3. Keeps focus on core activities.

  4. Brings in expertise from external providers.

  5. Can create strategic partnerships that strengthen the whole supply chain.

  In short, outsourcing helps airlines cut costs and remain competitive in a fast-changing industry.

Common Outsourced Functions in Airlines

• Ground Handling: Check-in, baggage, ramp, and flight ops support.

• Catering: Food and beverage services, often contracted per hub.

• Cargo & Storage: Outsourced warehousing and logistics.

• Fuel Supply: Negotiated with local fuel providers.

• Banking & Finance: Ticket sales systems, foreign exchange, and cash management.

• Technical Services: Routine and heavy maintenance.

• Advertising & Corporate Social Responsibility Projects: Often contracted to specialized agencies.

Example: Maintenance Outsourcing

• Aircraft maintenance is the best example of outsourcing.

• Every airline needs it, but it’s not what makes one airline unique over another.

• Outsourcing maintenance to specialized MRO (Maintenance, Repair & Overhaul) firms allows airlines to keep fleets safe and compliant while reducing cost and downtime. This is critical for profitability.

Benefits of Outsourcing

• Cost Reduction – avoid heavy capital investment.

• Flexibility – scale services up or down as needed.

• Quality & Expertise – specialized providers maintain high standards.

• Competitive Advantage – faster adaptation to market changes.

• Focus on Core Competencies – pilots fly, managers manage, engineers engineer.

Risks & Considerations

• ​Of course, outsourcing isn’t perfect. Airlines must carefully select providers and manage contracts.

• Poor outsourcing can lead to:

  • Loss of control over service quality.

  • Dependency on third parties.

  • Hidden costs in renegotiations or penalties.

• The key question airlines must ask: What should we outsource, and what should we keep in-house?"

Insourcing: The Flip Side

• ​Interestingly, some airlines practice insourcing.

• This means they provide non-core services themselves — not just for their own use but also for competitors.

• For example, Lufthansa Technik provides MRO services globally. Insourcing can create new revenue streams, keep employees productive, and achieve economies of scale.

• Outsourcing in aviation is about balance.

• Airlines outsource to save money and stay efficient, but insource when they can make revenue or maintain control.

• The ultimate goal is always the same: provide safe, reliable, and profitable air transport while staying competitive in a tough global market.