New Evidences on Airline Efficiency and Yields: A Comparative Analysis of Major North American Air Carriers and Its Implications

Significant changes in the North American aviation market during the 1990s and early 2000s have affected the financial situations of airlines. This paper reevaluates relative performance of the airlines by measuring and comparing the performance of 10 major North American airlines in terms of residual total factor productivity (TFP), cost competitiveness and residual average yields during the period 1990-2001. Findings indicate that North American airlines improved productive efficiency by about 12% between 1990 and 2001 despite the fact that there was substantial reduction of residual TFP between 2000 and 2001. Findings also showed that airlines need to perform well in both productive efficiency and pricing to be financially successful. Significant productivity improvement in the 1990s enabled the airlines to cope with rising input prices and downward pressure on yields. Airlines that aggressively expanded their fleet in response to the fast growing market during the mid-1990s have suffered loss in productive efficiency. Results of the analysis also show that the 9/11 terrorist attack increased airlines' unit costs and reduced their average yields. This caused major financial difficulties to all airlines and contributed to the failure of some.

Language

  • English

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Filing Info

  • Accession Number: 01000434
  • Record Type: Publication
  • Files: TRIS
  • Created Date: May 23 2005 12:31AM