Tracing the Woes: An Empirical Analysis of the Airline Industry
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)
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This range of elasticity estimates is similar to that reported in the existing literature (-1.37 to -2.01 (Berry and Jia, 2010); -1.4 (IATA, 2008)).
“This range of estimates is similar to that reported in the existing literature (-1.37 to -2.01 (Berry and Jia, 2010); -1.4 (IATA, 2008)).”
From Anticompetitive Effects of Common Ownership (2018) · cites this paper as Berry and Jia, 2010
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Anticompetitive Effects of Common Ownership
AZAR, J., SCHMALZ, M. C., & TECU, I. (2018) · The Journal of Finance · doi:10.1111/jofi.12698 · Cited by 980 · see citing works
Integrated flight scheduling and fleet assignment with improved supply-demand interactions
Birolini, S., Antunes, A. P., Cattaneo, M., Malighetti, P., & Paleari, S. (2021) · Transportation Research Part B: Methodological · doi:10.1016/j.trb.2021.05.001 · Cited by 69 · see citing works
- Authors
- Berry, S., & Jia, P.
- Affiliations
- Yale University (US)
- Massachusetts Institute of Technology (US)
- ORCID
- Jia, Panle
- Venue
- American Economic Journal: Microeconomics
- Publisher
- American Economic Association
- Published
- 2010-08-01
- Volume
- 2
- Issue
- 3
- Pages
- 1-43
- ISSN
- 1945-7669 (ISSN-L)
- 1945-7685
- OpenAlex
- W3125148828
- Cited by
- 246
- References
- 0
- Citations by year
- 2026: 7 · 2025: 18 · 2024: 9 · 2023: 13 · 2022: 14 · 2021: 17 · 2020: 16 · 2019: 14 · 2018: 30 · 2017: 19 · 2016: 10 · 2015: 12 · 2014: 27 · 2013: 12 · 2012: 11
- FWCI
- 24.40
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Journal Microeconomics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Aviation Industry Analysis and Trends
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Business, Management and Accounting › Strategy and Management › Transport and Economic Policies
- Keywords
- airline industry, airline bankruptcy, airline mergers, airline network structure, air travel demand, price sensitivity, nonstop flights, low-cost carriers, legacy carriers, airline profitability, marginal cost
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