MBAA 523

Advanced Aviation Economics

Online Course Syllabus
Credit Hours: 3
Delivery Method: Online (Internet / Blackboard)
Required Course Materials

Baye, M. R., & Prince, J. (2014). Managerial economics and business

strategy (8th ed.) New York: McGraw-Hill.
ISBN: 9780073523224

Doganis, R. (2009). Flying off course: Airline economics and marketing (4th
ed.) London: Routledge.
ISBN: 9780415447379

Suggested Supplemental Materials

American Psychological Association. (2010). Publication manual of the
American Psychological Association (6th ed.). Washington, DC:
Author.
ISBN: 978-1-4338-0561-5
(APA website: http://www.apastyle.org/manual/index.aspx)

Vasigh, B., Fleming, K. & Tacker, T. (2013). Introduction to air transport economics: From theory to
applications (2nd ed.). Burlington: Ashgate.

This syllabus was developed for online learning by Gerald N. Cook, D.B.A.
MBAA_523_Online_Syllabus_0514

The Internet is a valuable source of information within the air carrier industry; students will need to
access current information online.

Current reports on air transportation from the following periodicals and reports:
Airline Business (available through ProQuest, Hunt Library Databases)
Airlines for America (formerly Air Transport Association) (available at http://www.airlines.org)
Air Transport World (available through ProQuest, Hunt Library Databases)
Aviation Daily (available through Aviation Week Intelligence Network, Hunt Library Databases)
Current Market Outlook (available from Boeing at http://www.boeing.com/commercial/cmo).
Global Market Forecast (available from Airbus at http://www.airbus.com/media/gmf.asp)
US Department of Transportation (http://www.dot.gov)

Course Description
This course pursues an economic analysis of the global airline industry. Topics include the history and
economic rationale of government regulation and the effects of worldwide liberalization, demand for air
transportation and modeling, pricing and revenue management, supply and route architecture, cost
structure and methods of control, and fleet selection and financing.
Course Goals
This is a required course for the Master of Business Administration in Aviation (MBAA) degree program.
The course is designed to provide the student with the ability to apply fundamental concepts of
managerial economics to the global airline industry. Students will understand the nature of air
transportation demand and airline supply, the economic foundation for airline pricing and the complex
methodology for managing passenger and freight fares, airline costs and methods of control, and fleet
management. Economic theory is applied to current airline management challenges and placed within
the greater context of strategic management. Exams and assignments are analytical in nature,
requiring the student to bring together a variety of economic concepts. Students will have a broad
understanding of airline economics upon satisfactory completion of the course.
Learning Outcomes
Upon successful completion of this course, the student will be able to:
1. Describe the role of economic analysis and its application within strategic and tactical
management of the global airline industry.
2. Apply microeconomic principles of demand, supply, and cost to the unique features of the air
transportation industry.
3. Assess the potential for regional air transportation growth given the nature of air travel demand
including the application of factors that drive demand.
4. Describe airline cost structure, the nature of fixed, variable, and controllable costs, and methods
of control employed by network and low-fare carriers, and demonstrate the application of airline
costs to fleet selection.
5. Identify the major segments of passenger and cargo demand and associated price elasticity of
demand.
6. Contrast the various product and route structure alternatives, including the costs and benefits of
each, and means for achieving product differentiation, and describe and give examples of
various passenger and cargo business models.
7. Describe the economic market types and contrast the pricing and output decisions of firms.

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8. Analyze the concept of price discrimination to airline pricing, and understand the conceptual
foundations of revenue management and their application in airline and other industries.
9. Discuss the regulatory history of international air transportation and the evolution toward
liberalization and competitive markets, and assess the effect of liberalization on air transport
growth, product development, and pricing.
10. Compare and contrast the economics of the global airfreight market with passenger service.
Grading
These are the major assignments in the course and will be the basis for evaluation according to the
grading scale shown in the table below. All activities in this course have a maximum score of 100
points, and are weighted according to the matrix below. If you have questions about the scoring and
weights, contact your instructor.
Course Grade Scale

Evaluation Items & Weights

90 100%

Discussions

10%

80 89%

Written Assignments

30%

70 79%

Problem Sets

30%

60 69%

Midterm Examination

15%

59%

Final Examination

15%

Total

100%

Discussions
Each module includes a discussion topic and question. 10% of your course grade is based on a
carefully considered initial posting addressing the weeks topic and on responses to other students
postings. Responses should offer a different perspective, introduce related aspects, provide
constructive criticism, or otherwise make a substantive contribution to the class discussion. Topics are
sufficiently broad to allow each student to address new dimensions. The online discussion serves the
same purpose as a traditional classroom discussion allowing students to learn from each other and the
instructor. Although informal, postings should be carefully drafted to convey ideas and facts clearly and
concisely in Standard English as would be appropriate in corporate email.
Written Assignments
Four assignments are spaced throughout the course. The objective of each assignment is to add depth
to an important aviation economics topic. The modules contain detailed instructions for each paper. The
written assignments comprise 30% of your course grade.
For written assignments, this course utilizes a plagiarism prevention service of Blackboard known as
SafeAssign. This service checks all submitted papers against the following databases:

Comprehensive index of documents available for public access on the Internet

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ProQuest ABI/Inform database with over 1,100 publication titles and about 2.6 million articles
from '90s to present time, updated weekly (exclusive access)
Institutional document archives containing all papers submitted to SafeAssign by users in their
respective institutions
Global Reference Database containing papers that were volunteered by students from
Blackboard client institutions to help prevent cross-institutional plagiarism.

To learn more about SafeAssign, review the Blackboard SafeAssign Student Guide.
Written Assignment 1 - Estimating Regional Air Transportation Demand
The objective of this assignment is to develop an appreciation for the methods used by two
largest commercial aircraft manufacturers, Airbus and Boeing, to forecast demand for air travel
and the market for commercial aircraft over the next twenty years. In a formal written report, you
will summarize the air travel demand for a world region explaining the market forces which will
cause this regions demand to be above or below the world average.
Written Assignment 2 - Fleet Replacement Analysis:
This assignment has three objectives, to: 1) become familiar with the type and magnitude of
mainline aircraft operating costs; 2) understand the operating economics of new versus older
aircraft; and, 3) learn how net present value analysis is used in capital acquisition decisionmaking. In your role as the senior airline financial analyst for a major airline, you will make a
recommendation to executive management on the pace at which an older fleet should be retired
and replaced with new aircraft.
Written Assignment 3 - Airline Pricing Research:
The goal of this assignment is to illustrate the result of airline price discrimination or revenue
management on business and leisure travelers. You will choose a city-pair and two competing
airlines and compare available fares for advanced purchase trips versus immediate travel.
Written Assignment 4 - Product Offering:
This assignment demonstrates the variety of airline product offerings available, each intended to
meet the diverse wants and needs of passengers. In a written report, you will compare and
contrast the product offerings of two airlines in a city-pair of your choosing.
Problem Sets
Modules 1-8 problem sets provide the opportunity to practice and consolidate the economic principles
necessary to understand unique economics of the airline industry. Each problem set is tailored to the
managerial economics reading. Each graded problem set has a strict due date at the end of the
module.
Exams
Both the midterm and the final examinations are limited to two and one half hours. The midterm covers
Modules 1 through 5 with Modules 6 through 9 included in the final. Each examination consists of five
(5) short essay questions designed to broadly cover the course content. The examinations are openbook with sufficient time allowed to plan and organize a concise answer to each question in order to
demonstrate a mastery of the subject. The midterm and final examinations are each worth 15% of your
course grade.

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Library
Embry-Riddle Aeronautical University has one of the most complete library collections of aviationrelated resources in the world.

ERAU Libraries: http://library.erau.edu/

Hunt Library Worldwide: Information, Services, Help
o Worldwide Library: Basic Training
o Worldwide Library: Ask-a-Librarian
o Reference: Research Request

Contact Information

Hours: Monday - Friday 8:00 a.m. - 5:00 p.m. Eastern Time

Telephone: 1-800-678-9428 or 386-226-6947
Email: library@erau.edu

RefWorks
RefWorks is an online database tool that can manage references and citations from almost any source.
It provides specific guidance in how to collect and use references, create bibliographies, and write
research papers.
You may access it through this ERAU organizational login link when signed in to ERNIE or directly
from the RefWorks website (http://www.refworks.com). A different link must be used for off-campus
access (see these instructions). RefWorks requires users to create a RefWorks-specific username
and password. Please contact the Hunt Library if you have any questions.
Course Policies
Academic Integrity
Embry-Riddle is committed to maintaining and upholding intellectual integrity. All students, faculty, and
staff have obligations to prevent violations of academic integrity and take corrective action when they
occur. The adjudication process will involve imposing sanctions which may include, but are not limited
to, a failing grade on the assignment, a failing grade in a course, suspension, or dismissal from the
University, upon students who commit the following academic violations:
1. Plagiarism: Presenting the ideas, words, or products of another as ones own. Plagiarism
includes use of any source to complete academic assignments without proper acknowledgement
of the source. Reuse or resubmission of a students own coursework if previously used or
submitted in another course, is considered self-plagiarism, and is also not allowed under
University policy.
2. Cheating: A broad term that includes, but is not limited to, the following:
a. Giving or receiving help from unauthorized persons or materials during examinations.
b. The unauthorized communication of examination questions prior to, during, or following
administration of the examination.
c. Collaboration on examinations or assignments expected to be, or presented as, individual
work.
d. Fraud and deceit, that include knowingly furnishing false or misleading information or failing
to furnish appropriate information when requested, such as when applying for admission to
the University.

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Note: The Instructor reserves the right to use any form of digital method for checking plagiarism.
Several electronic systems are available and other methods may be used at the Instructors discretion.
Online Learning
This course is offered through ERAU Worldwide Online (Blackboard) and runs nine (9) weeks. The first
week begins the first day of the term and ends at midnight EDT/EST (as applicable) seven days later.
Success in this course requires in-depth study of each module as assigned, timely completion of
assignments, and regular participation in forum discussions.
Late work should be the exception and not the rule and may be downgraded at the discretion of the
Instructor, if accepted at all. Unless all work is submitted, the student could receive a failing grade for
the course. Extensions may be granted for extenuating circumstances at the discretion of the Instructor
and only for the length of time the Instructor deems appropriate. The most important element of
success in an online course is to communicate with your Instructor throughout the term.
Conventions of online etiquette, which include courtesy to all users, will be observed. Students should
use the Send Email function in Blackboard for private messages to the Instructor and other students.
The class Discussion Board forums are for public messages.
It is highly recommended that students keep electronic copies of all materials submitted as
assignments, discussion board posts and emails, until after the end of the term and a final grade
is received. When posting responses in a discussion forum, please confirm that the responses
have actually been posted after you submit them.
Course Schedule
Modules

Titles / Topics

Activities
1.1
1.2

Fundamentals of
Managerial Economics
and Introduction to the
Airline Industry

1.3
1.4
1.5
1.6
2.1
2.2

Demand for Air

Transportation

2.3
2.4
2.5

Discussion: Introduce Yourself

Readings: Baye & Prince Ch 1; Doganis, Ch 1, IATA
Vision 2050 1.2
Videos: Taking "Steerage" Literally and Present Value
Discussion: Applying the Porter Model to the Airline
Industry
Assignment: Problem Set 1
Written Assignment 1 Preview: Estimating Regional Air
Transportation Demand
Readings: Baye & Prince Ch 2; Doganis Ch 8
Videos: Air Traffic in 24 Hours and Managerial
Economics
Discussion - Air Travel Demand
Assignment: Problem Set 2
Written Assignment 1: Estimating Regional Air
Transportation Demand

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Forecasting Demand

3.1
3.2
3.3
3.4
3.5
4.1
4.2

Airline Cost Structure

Market Structure and

Determinants of Airline
Costs

4.3
4.4
4.5
5.1
5.2
5.3
5.4
5.5
5.6
6.1

Pricing

Product Offering

Oligopoly

International Airline
Economic Regulation
and Liberalization and
Air Freight

6.2
6.3
6.4
6.5
7.1
7.2
7.3
7.4
7.5
8.1
8.2
8.3
8.4
8.5
9.1
9.2
9.3
9.4

Readings: Baye & Prince Ch 3; Doganis Ch 9

Videos: Microeconomics and Linear Regression
Discussion: Airline Response to Recession
Assignment: Problem Set 3
Written Assignment 2 Preview: Fleet Replacement
Analysis
Readings: Baye & Prince Ch 5; Doganis Chs 4 & 6
Videos: Ryanair; Production Decisions and Economic
Profit
Discussion: Low Cost Carriers
Assignment: Problem Set 4
Written Assignment 2: Fleet Replacement Analysis
Readings: Baye & Prince Ch 8; Doganis Ch 5
Videos: Forms of Competition
Discussion - Passengers Wants in Air Travel
Assignment: Problem Set 5
Examination: Midterm
Written Assignment 3 Preview: Airline Pricing Research
Readings: Baye & Prince Ch 11; Doganis Ch 11; Reese
and Sobel Article
Video: 1987 Alaska Airlines
Discussion: Pricing Strategies
Assignment: Problem Set 6
Written Assignment 3: Airline Pricing Research
Readings: Baye & Prince Ch 13; Doganis Ch 10
Videos: Singapore Airlines and Ryanair
Discussion: New Carrier Entry
Assignment: Problem Set 7
Written Assignment 4 Preview: Product Offering
Readings: Baye & Prince, Ch 9
Videos: DHL Commercial and Oligopoly
Discussion: Increased Competition
Assignment: Problem Set 8
Written Assignment 4: Product Offering
Readings: Doganis Chs 2 (sections 2.1 through 2.3), 3,
and 12
Videos: FedEx and UPS
Discussion: Airfreight
Examination: Final

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