New evidences on airline efficiency and yields: a comparative analysis of major North American air carriers and its implications

Tae Hoon Oum, Xiaowen Fu and Chunyan Yu

Transport Policy, 2005, vol. 12, issue 2, 153-164

Abstract: This paper measures and compares the performance of 10 major North American airlines in terms of residual total factor productivity, cost competitiveness, and residual average yields during the period 1990-2001. Our key findings are: (a) the airlines in North American improved productive efficiency by about 12% between 1990 and 2001 despite the fact that there were substantial reduction of residual TFP between 2000 and 2001; (b) airlines need to perform well in both productive efficiency and pricing to be financially successful; (c) significant productivity improvement in the 1990s enabled the airlines to cope with rising input prices and downward pressure on yields; (d) airlines that aggressively expanded fleet in response to the fast growing market during the mid-1990s have suffered loss in productive efficiency; (e) the 9/11 terrorist attack has led to substantial reductions in airlines' yields, and declining productivity and increasing unit cost.

Date: 2005
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