Cost Allocation in Airlines

Cost allocation in airlines refers to the process of distributing various operating expenses to specific departments or services, such as ticket sales, flight operations, and maintenance. This ensures that each part of the airline is accountable for its costs, helping management understand where money is being spent. For instance, the costs of fuel, crew salaries, and airport fees might be allocated to specific flights based on distance and passenger volume. By accurately allocating costs, airlines can better assess profitability, set competitive pricing, and make informed decisions regarding services and routes.