Tracing the Woes: An Empirical Analysis of the Airline Industry
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. Compa...
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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American Economic Association
2012
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| Online Access: | http://hdl.handle.net/1721.1/70929 |
| _version_ | 1811087091891699712 |
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| author | Barwick, Panle Jia Berry, Steven |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Barwick, Panle Jia Berry, Steven |
| author_sort | Barwick, Panle Jia |
| collection | MIT |
| description | 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) |
| first_indexed | 2024-09-23T13:39:39Z |
| format | Article |
| id | mit-1721.1/70929 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T13:39:39Z |
| publishDate | 2012 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/709292022-09-28T15:21:20Z Tracing the Woes: An Empirical Analysis of the Airline Industry Barwick, Panle Jia Berry, Steven Massachusetts Institute of Technology. Department of Economics Barwick, Panle Jia Barwick, Panle Jia 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) 2012-05-24T18:17:21Z 2012-05-24T18:17:21Z 2010-08 Article http://purl.org/eprint/type/JournalArticle 1945-7685 1945-7685 http://hdl.handle.net/1721.1/70929 Berry, Steven, and Panle Jia. “Tracing the Woes: An Empirical Analysis of the Airline Industry.” American Economic Journal: Microeconomics 2.3 (2010): 1–43. Web. 24 May 2012. © 2010 American Economic Association en_US http://dx.doi.org/10.1257/mic.2.3.1 American Economic Journal: Microeconomics Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association MIT web domain |
| spellingShingle | Barwick, Panle Jia Berry, Steven Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title | Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title_full | Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title_fullStr | Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title_full_unstemmed | Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title_short | Tracing the Woes: An Empirical Analysis of the Airline Industry |
| title_sort | tracing the woes an empirical analysis of the airline industry |
| url | http://hdl.handle.net/1721.1/70929 |
| work_keys_str_mv | AT barwickpanlejia tracingthewoesanempiricalanalysisoftheairlineindustry AT berrysteven tracingthewoesanempiricalanalysisoftheairlineindustry |