United Airlines Struggles to Control Costs

United Airlines is the second largest air carrier in the world. It has hubs in Chicago, Denver, Los Angeles, San Francisco, and New York and flies to $109$ destinations in $23$ countries. Destinations include Tokyo, London, and Frankfurt.

Back in $2002,$ United filed for bankruptcy. Industry analysts reported that United had relatively high fixed costs, making it difficult for the company to cut costs quickly in line with its reduction in revenue. A few years later, United emerged from bankruptcy, and in $2010$ merged with Continental Airlines. Although financial information was presented separately for each company $($United and Continental$)$ in $2010,$ both companies are now owned by United Continental Holdings, Inc. The following financial information for United

Airlines is from the company's income statement for the year ended December $31,2010($amounts are in millions$).$ Review this information carefully. Which costs are likely to be fixed?

Operating revenues:

Passenger

Cargo

Other

Total revenues

Operating expenses:

Salaries

Aircraft fuel

Aircraft rent

Landing fees

Depreciation and amortization

Aircraft maintenance

Other operating expenses

Total operating expenses

Operating income

$$19,682$

$$4,212$

$5,700$

$326$

$1,077$

$903$

$980$

$5,466$