The airline industry is face with unique challenges when establishing economies of scale and scope.
While most organizations improve economies of scale by growing larger, in many instances this actually contributes to economies of scope in the airline industry.
One way to do this is through international expansion (Katrishen & Scordis, 1998).
British Airways has expanded into other countries, opening franchises in European countries and across seas to facilitate better economies of scale.
Economies of scale are nothing more than an economic "property of production" that explains what happens to cost when an entity increases the quantity of input by a predetermined amount (Wikipedia, 2005).
If costs increases with increasing quantity of input then economies of scale are not created; if costs however increase more than quantity of input diseconomies are created whereas economies of scale are created when cost increases less than quantity of input factors, suggesting an organization is making positive gains (Wikipedia, 2005).
Likewise economies of scale tend to focus on changes that occur on the supply side of operations, including changes that occur in production whereas economies of scope focus on changes that occur with the demand side of production including marketing (Wikipedia, 2005).
Many marketing strategies arise from economies of scope including family branding and product bundling (Wikipedia, 2005).
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Business Economics The Airline Industry: An Examination of Economies of Scale and Scope More so than in any other industry economies of scale and scope are vital to the health and well being of the airline industry.