Economic theory tells us that in the short-run fixed costs are unavoidable. But for an airline all costs are avoidable for a specific market, including the cost of the aircraft. The analysis assumes there is no alternative use of the airline's aircraft, however, a major airline has many alternative uses for its aircraft (other routes, leasing). The lost revenue from its alternative use is referred to as opportunity cost and should be included in calculating variable costs.

By quickly changing the number of daily scheduled flights, both increasing and decreasing flights as competition appeared in that specific market, the airline implies the aircraft had a value in an alternative use. Therefore, variable costs would include the pro rata cost of all aircraft (or as a minimum its value in its alternative use), including operation and maintenance costs, gate costs and a portion of general and administrative costs.

The output for an airline is passenger miles. Average variable costs are calculated using the number of passenger miles, not seat miles. These average variable costs per passenger mile would be compared to the revenue per passenger mile. Unless the number of passengers increased dramatically with the increase flight schedule, average variable costs for the airline would have increase dramatically in that market while prices declined.

Another common mistake for an airline is to assume the marginal cost in filling an empty seat are limited to providing food and drink and the cost of writing a ticket. If introducing a program to sell additional seats changes the behavior of current passengers such that some current passengers take advantage of lower priced tickets, the lost revenue from existing ticket sales are also a cost associated with filling these empty seats. As a result, the marginal cost of filling these seats can be much greater than expected.

This common mistake, assuming capital expenditures are fixed, often results in incorrect investment decisions. If a capital asset, often referred to as fixed, has other uses then in any investment decisions it should be treated as a variable cost. Its cost to use the asset is the value it would have in its best alternative use, its opportunity cost.

It would appear the Justice Department had a much better case than suggested by the commentary. Most likely the judges ruling was a combination of inadequate case preparation and/or presentation by the Justice Department and a lack of understanding of economics by the judge or both.