A multi-regression analysis of airline indirect operating costs

Abstract

A multiple regression analysis of domestic and local airline indirect costs was carried out to formulate cost estimating equations for airline indirect costs. Data from CAB and FAA sources covering the years 1962-66 was used, and the costs were broken down into the classification of the uniform system of accounts Form 41, used by the airlines in reporting to the CAB. Thus regression equations were found for 1) annual system expenses in the categories such as Passenger Servicing, Traffic Servicing, Promotion and Sales, General and Administrative, etc. as well as an overall indirect operating cost; and 2) annual station expenses where the Aircraft and Traffic Servicing expenses for individual stations are examined. A stepwise regression technique is used to select the best combinations of independent variables for the equations. The independent variables were data such as revenue passenger miles, passengers enplaned, revenue aircraft miles, total revenue aircraft departures, etc. The results generally showed that a high degree of correlation could be found between the costs and some combination of these variables.