THE IMPACT OF FIRM FINANCIAL CONDITION ON AIR FARES – A CONTINGENCY APPROACH

Christian Hofer

No 208020, 47th Annual Transportation Research Forum, New York, New York, March 23-25, 2006 from Transportation Research Forum

Abstract: This research reviews and reconciles previous research on the relationship between airline financial condition and air fares. A contingency framework is developed and empirically tested using data from the U.S. airline industry. The results suggest that the magnitude of the effect of financial condition on prices depends on airline characteristics such as operating costs and market power as well as on competitive characteristics like market concentration and a firm’s financial condition relative to its route market competitors. It is further shown that this effect is substantially larger for firms operating under Chapter 11 protection than for firms approaching bankruptcy.

Keywords: Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 29
Date: 2006-03
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ndtr06:208020

DOI: 10.22004/ag.econ.208020

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