Fixed Cost Dilution…from the Factory to the Skies

💸 One of the most overlooked drivers of airline cost efficiency (CASM) is something that manufacturers have obsessed over for decades: setup time reduction.

In lean manufacturing ⚙️, setup time refers to the unproductive transition between production runs—the time when machines are being adjusted, tools are changed, and lines aren’t producing. The goal is to reduce setup time to increase throughput and lower per-unit costs.

Now, let’s translate that to aviation. ✈️
In the airline world, takeoffs and landings are the “setup” phase—the most fuel-intensive, labor-heavy, and airport fee-driven part of any flight. Short-haul flights, just like frequent factory changeovers, introduce excessive fixed costs per cycle, making each mile flown more expensive.

The key to reducing CASM (Cost per Available Seat Mile) is similar to reducing setup time in a factory:
🛬  Optimize stage length – Spreading takeoff, landing, and airport costs over longer flights lowers CASM.
🛫  Improve aircraft turnaround times – faster aircraft turnaround increases utilization, spreading fixed costs over more ASMs.
📊  Balance efficiency with network flexibility – Manufacturers optimize batch size to balance cost & responsiveness; airlines must optimize stage length to balance cost & market reach.

Does this really work?
Last year, Frontier Airlines reduced aircraft utilization by 15% while increasing Revenue per ASM by 15% YoY, showing how network optimization (fewer, more efficient flights) improved profitability. Yes, you read that right...Meanwhile, airlines that didn’t adjust stage length and utilization struggled with higher CASM.

🚀 So, whether you run an airline or a factory, minimizing costly transitions and maximizing productive operation time is the key to efficiency.

I love applying concepts from one world to another. This same principle helps me choose what line to get in at the grocery store...