Tracing the Woes: An Empirical Analysis of the Airline Industry
Steven Berry () and
Authors registered in the RePEc Author Service: Panle Jia Barwick ()
No 14503, NBER Working Papers from National Bureau of Economic Research, Inc
The U.S. airline industry went through tremendous turmoil in the early 2000's. There were four major bankruptcies and two major mergers, with all legacy carriers reporting a large profit reduction. This paper presents a structural model of the airline industry, and estimates the impact of demand and supply changes on profitability. We find that, compared with the late 1990s, in 2006, a) air-travel demand was 8% more price sensitive; b) passengers displayed a strong preference for direct flights, and the connection semi-elasticity was 17% higher; c) the changes of marginal cost significantly favored direct flights. These findings are present in all the specifications we estimated. Together with the expansion of low cost carriers, they explained more than 80% of the decrease in legacy carriers' variable profits.
JEL-codes: L0 L1 L13 L91 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Published as Steven Berry & Panle Jia, 2010. "Tracing the Woes: An Empirical Analysis of the Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 1-43, August.
Downloads: (external link)
Journal Article: Tracing the Woes: An Empirical Analysis of the Airline Industry (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14503
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().