Question

Fuel is an airline's biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. Is the price of fuel a fixed cost or a variable cost for an airline? Explain.

Answer 1

Here, as given that, in 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. As know that, the total cost of any commodity is the sum of total fixed cost and total variable cost. Settled expenses are those components of costs, which don't rely on the volume of creation. Variable expenses then again, will incorporate every such part that specifically related with the volume of generation.

Fuel is the single greatest costs of aircraft's. Amount of fuel devoured via carriers will rely on add up to remove canvassed by stream in a period. More flight will mean more distance jet is flying and so more and more consumption of fuel to take place.

Thus, fuel expense will rise with the rise in flying distance. Due to this direct relation, a fuel expense is a variable cost of airlines.