Why Can't US Airlines Make Money?
American Economic Review
vol. 101,
no. 3, May 2011
(pp. 233-37)
Abstract
US airlines have lost nearly $60 billion ($2009) in domestic markets since the 1978 deregulation, most of it in the last decade. The dismal financial record challenges the economics of deregulation. I examine some of the common explanations among industry participants and researchers—including high taxes and fuel costs, weak demand, and competition from lower-cost airlines. Major drivers seem to be the demand downturn after 9/11—demand remains much weaker today than in 2000—and the large cost differential between legacy and low-cost carriers, which has persisted even as the price differential between them has greatly declined.Citation
Borenstein, Severin. 2011. "Why Can't US Airlines Make Money?" American Economic Review, 101 (3): 233-37. DOI: 10.1257/aer.101.3.233JEL Classification
- D24 Production; Cost; Capital, Total Factor, and Multifactor Productivity; Capacity
- L25 Firm Performance: Size, Diversification, and Scope
- L51 Economics of Regulation
- L93 Air Transportation
- L98 Industry Studies: Utilities and Transportation: Government Policy