A Cost Analysis for Chinese Aviation

With a continual increase in air aviation turnover and passenger numbers, the airline industry in China has significant opportunities and challenges, namely an increasing market demand and rising costs. In this paper, we first structurally divide Chinese airline costs into controllable and the uncontrollable costs, and then determine that the controllable costs are primarily related to aviation fuel costs. Using a path analysis technique, we select some core influencing factors, such as the total aviation turnover volume, product price, fuel efficiency, fuel price, and technological change, and collect data for each of these factors from 1995 to 2010. From a multivariate Bayes regression model, we determine that for a 1%increase in aviation turnover, fuel efficiency, fuel price and product price, there is an increase of 0.06%, 2.6%, 0.70% and 3.54% respectively, in an airline´s main business costs. We conclude that a reduction in total costs can be achieved through a reduction in fuel consumption and cost, and an improvement in flight technology and fuel efficiency.