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Tracing the Woes: An Empirical Analysis of the Airline Industry

Steven Berry () and Panle Jia
Authors registered in the RePEc Author Service: Panle Jia Barwick ()

American Economic Journal: Microeconomics, 2010, vol. 2, issue 3, 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)

JEL-codes: L13 L25 L93 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mic.2.3.1
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