Changes of Airlines Profit Structure and Network Operation Influenced by Internalization of External Costs

摘要

Airlines profit structure and network operation will be influenced by internalization ofexternal costs such as emission charge;;noise charge;;and other various environmentaltaxes as air travel contributes to climate change and triggers environmental andeconomic damages and it will become intensified. From 2012;;CO_2 emissions fromcommercial flights to;;from;;and within the EU started being covered by EU EmissionTrading Scheme (ETS). It went into effective for the carriers based in the EU region andit will be enforced to all carriers in the near future.As environmental costs are part of Direct Operation Costs (DOC);;it can give directinfluence on profitability of airlines. This additional cost caused by environmentalrequirement will affect to networks and profit structures of airlines according to the2changes in demand. To ascertain actual impacts of EU-ETS in Korean aviation;;empirical data of airlines will be used and we will identify which network model ismore optimal when it is influenced by internalization of external environmental costs.The study may contribute to the aviation industry in South Korea to become a signatoryto the Post Kyoto Agreement as EU-ETS costs of airlines will be broadened.