Total air transport operating costs are divided into three general classifications : (1) Significant operating costs which are defined as those resulting from the flight of an aeroplane or those affected by variation of aeroplane size, power, initial cost, and aerodynamic efficiency. Equations for the development of significant costs are presented. (2) Passenger service costs which are defined as those which vary with the number of passengers aboard an aeroplane are enumerated. (3) Overhead costs in air transportation are also dwelled upon and it is concluded that these costs change their proportion to significant costs when the physical and performance characteristics of the aeroplane being considered change.

The marked effect on significant cost of varying aeroplane utilisation is brought out. Utilisation is also shown to be chiefly a function of trip length, with block speed, seasonal schedule variation and other factors being secondary functions.

The effect on significant cost of varying block speed either by increasing cruising power or improving aerodynamic efficiency is investigated for one type of transport aeroplane. Increased block speed obtained by increasing cruising power is found to increase significant cost very rapidly. Increased block speed obtained by improving aerodynamic efficiency is found to decrease significant cost appreciably and relatively large increases in aeroplane first cost are found to be justified if aerodynamic efficiency is improved. The adverse effect on significant cost of increasing trip length is investigated. The effect of changing specific fuel consumption is discussed.

It is pointed out that economic factors apart from those associated with fundamental aeroplane design and performance, such as interior arrangement, safety records, competition and general economic conditions, play the major role in the economic outcome of air transportation.