Tracing the Woes: An Empirical Analysis of the Airline Industry
American Economic Journal: Microeconomics
vol. 2,
no. 3, August 2010
(pp. 1-43)
Abstract
The US airline industry went through tremendous turmoil in the early 2000s, with four major bankruptcies, two major mergers, and various changes in network structure. This paper presents a structural model of the industry, and estimates the impact of demand and supply changes on profitability. Compared with 1999, we find that, in 2006, air-travel demand was 8 percent more price sensitive, passengers displayed a stronger preference for nonstop flights, and changes in marginal cost significantly favored nonstop flights. Together with the expansion of low-cost carriers, they explain more than 80 percent of legacy carriers' variable profit reduction. (JEL L13, L25, L93)Citation
Berry, Steven, and Panle Jia. 2010. "Tracing the Woes: An Empirical Analysis of the Airline Industry." American Economic Journal: Microeconomics, 2 (3): 1-43. DOI: 10.1257/mic.2.3.1Additional Materials
JEL Classification
- L13 Oligopoly and Other Imperfect Markets
- L25 Firm Performance: Size, Diversification, and Scope
- L93 Air Transportation
There are no comments for this article.
Login to Comment