Midterm

Question 0

What % of avit economics is millitary?

Answer 0

55%

Question 1

Top three costs for airlines

Answer 1

1. Fuel
2. Labor
3. Maintenance

Question 2

Top 3 levels of management:

Answer 2

1. Top
2. Middle
3. Operating

Question 3

Top management roles:

Answer 3

Policy Makers

Question 4

Middle management roles:

Answer 4

Interpret policies & execute them

Question 5

Operating management roles:

Answer 5

Final execution of policies by employees under its supervision

Question 6

Board of Directors

Answer 6

Chief governing body of the organization

Question 7

How are board members elected?

Answer 7

Elected by stockholders and can include individuals from banks, hotels, former political & military leaders

Question 8

Board of directors role:

Answer 8

Responsible for the appointment of president, secretary, treasurer, and other executive officers

Question 9

Management definition:

Answer 9

Process of achieving the organization’s goals through coordinated performance of 5 specific functions

Question 10

What are the 5 specific functions of management?

Answer 10

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

Question 11

Organization definition:

Answer 11

The framework within which the management process can be carried out as efficiently or greater as a smaller firm

Question 12

What are characteristics of oligopolies?

Answer 12

1. Substantial economies of scale
2. Growth thru merger
3. Mutual dependence
4. Price rigidity & non price competition
5. Large market share
6. High barriers to entry

Question 13

What happened to market share of airlines in the 70’s & 80’s?

Answer 13

Deregulation took the guaranteed funding away from airlines. This led to a increase in market share as many airlines went bankrupt or merged. Increase in market share means each firm holds a larger ownership of the market since there are less firms.

Question 14

Effect of mergers on an oligopolistic market:

Answer 14

1. Increase market share

2. Increase market power

Question 15

What is meant by mutual dependence?

Answer 15

Airline pricing power depends on rival’s actions. An airline must at least cover its operating costs thus it is hard to undercut rivals. If price is increased, demand will shift to the cheaper carriers and hurt the company who raised its prices.

Question 16

What is meant by non price competition?

Answer 16

Due to the price rigidity, competition in the market must be done in other ways. Ex: advertising, customer service (HUGE), inflight service, and point to point service