Cost Stickiness Comparison of Airlines in the US and Eastern Asia

• Main Authors: Chen, Ti, 陳諦
• Other Authors: Yang, Ching-Hsi
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/92969836694218516204

碩士 === 國立臺北大學 === 會計學系 === 100 === Nowadays, an enterprise faces various competitionsfrom all over the world after globalization, and cost management plays an important role whether an enterprise can outperform its peers. Cost stickiness, which means that costs decrease less with operating activity decreases than they increase in response to equivalent activity increases, is one of cost inefficiencies. Airway, a capital-intensive industry with tough competition, becomes lessprofitable recently. However, airwaycompaniesin EasternAsia are more profitable than those in the Statesare, so I want to explore if cost stickiness exists in the airway industry, and whether it can explainthe difference of profitabilities. I use US and East Asian listed airway companies’ financial data in 2001~2011 to build my multiple regression models, and estimate by least-squared method. I have two differences compared to previous studies. First, I adopt not only SG&A costs but also other cost items as well, such as landing, fuel, etc. Second, I add auto-regression model. I find that salary cost in theUS and SG&A cost inEasternAsia are obviously sticky. But salary and total costs inEasternAsia are obviously “reverse sticky”, which means costs decrease more when operating activity decreases. In addition,Iset up several criteria to see whether cost stickiness increases or decreases. Iexplore that stickiness of fuel and total costs becomes higher with economic growth, while salary cost in the US decreases more. Overall, Companies in the Statessupport that cost stickiness will be lower with deficits in last period, butthose inEast Asia doesn’t. Most of myhypotheses are partly supported; some cost items do while others don’t. This reflects that cost stickiness comes from managements’ decision; if they decide to keep certain costs,they have to cut the other costsmore to meet the cost target. US airline companies’ stickiness of total cost is higher while SG&A is lower, and when sales increase, US’s costs increase more than East Asia’s costs do. In term of “times”, US get more “stickiness” and less “reverse stickiness” than their East Asian peers. What makes US airline companies less profitable must be complicated, but according to the paper, cost stickiness should be one of the reasons.