Profit Margins in U.S. Domestic Airline Routes

Hakan Yilmazkuday

No 2125, Working Papers from Florida International University, Department of Economics

Abstract: This paper estimates profit margins in the U.S. airline industry at the domestic route level. The dynamic estimation methodology used not only is robust to any simultaneity/endogeneity bias by construction but also results in profit margin estimates that are highly consistent with actual profit data from the U.S. airline industry. Estimated annual profit margins have an average of about 13.3%, with a range between 2.7% and 42.9% across routes. A cross-route analysis further suggests that annual profit margins increase with the market share of the largest airline serving the route, whereas they decrease with airfare. Important policy suggestions follow.

Keywords: Profit Margin; Price Elasticity; U.S. Domestic Routes (search for similar items in EconPapers)
JEL-codes: C32 L93 (search for similar items in EconPapers)
Pages: 103 pages
Date: 2021-11
New Economics Papers: this item is included in nep-com, nep-eff, nep-his, nep-ind, nep-reg and nep-tre
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Citations: View citations in EconPapers (1)

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https://economics.fiu.edu/research/pdfs/2021_working_papers/21251.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Profit margins in U.S. domestic airline routes (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fiu:wpaper:2125

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