Price and marginal cost effects of on-time performance: Evidence from the US airline industry

We examine the impact of flight delay on market power in the U.S. airline industry. Consistent with the literature, our estimation results confirm that flight delays are associated with negative consumer welfare effects. Most importantly, we find that poor on-time performance negatively impacts product markup—proxy for market power. Furthermore, we are able to decompose these markup effects into price and marginal cost effects and evidence suggests that the source of these negative markup effects is primarily driven by negative price responses.     

Economies of traffic density and scale in the integrated air cargo industry: The cost structures of FedEx Express and UPS Airlines

This paper examines the cost structures of the leading integrated air cargo carriers, FedEx Express and UPS Airlines. A total cost model is estimated for the two carriers using quarterly data on domestic operations and costs over a nine-year period (2003–2011). The estimated model indicates that the integrated industry exhibits increasing returns to traffic density and constant returns to scale. Accounting for carrier-specific differences in cost structure and network size, FedEx Express is found to be more cost-efficient than UPS Airlines. Looking at the carriers individually, UPS Airlines exhibits substantial economies of traffic density and constant returns to scale while FedEx Express' cost structure is characterized by weak economies of density and constant returns to scale. The combined effect of returns to density and returns to scale on the cost structures of integrated carriers is captured by economies of size. Both FedEx Express and UPS Airlines exhibit economies of size, indicating that carriers in the integrated industry can be more cost efficient by making appropriate adjustments to their network size as their output grows. Moreover, the relative cost-efficiencies of the carriers are reversed when their network-size differences are not controlled.     

Investigating the effects of economies of scope on firms’ pricing behavior: Empirical evidence from the US domestic airline industry

This study investigates to what extent cross-product (belly cargo) output affects (passenger ticket) prices in the US domestic airline industry. The empirical analysis indicates that greater cargo volumes generally result in lower air fares, presumably as a result of the airlines’ realization of economies of scope. This magnitude of this price effect, however, depends on certain firm and route market characteristics. The findings of this study add to extant research on economies of scope, multi-product yield management and airline pricing and provide important insights for policy makers and airline managers alike.     

Estimating the impact of airport privatization on airline demand: A regression-based event study

This paper develops an empirical model of passenger demand for routes of airports subject to either imminent or recent privatization. We investigate whether the privatization process produces a sequential impact over traffic. By employing a regression-based event methodology and controlling for fixed effects, price endogeneity and sample selection, we perform an econometric analysis of pre-privatization and post-privatization dynamic patterns of demand to infer the demand consequences of the major change in airport governance. We examine recent Brazilian airport privatization experience as a case. The main results suggest that privatization produced an overall increase in airline demand and that the airport notably recognized with the greatest demand potential and with the largest market penetration of a fast-growing low cost newcomer had the highest estimated ceteris paribus effect of privatization on demand.     

A study of the competitiveness of airline cargo services departing from Korea: Focusing on the main export routes

The purpose of this study was to identify the competitive service factors of airlines by rating the views of forwarders in the export market departing from Korea. An Analytic Hierarchy Process was applied to data collected from the officers of the top 50 forwarders in charge of choosing the airlines. The results showed that price appeared to be the most important factor for all routes. Other attributes showed varying degrees of importance, depending on the route. Based on the results, the most competitive airlines were selected for each route and strategic alternatives were proposed for each airline.     

The effects of perceived crowding,emotional dissonance,and emotional exhaustion on critical job outcomes: A study of ground staff in the airline industry

Using Conservation of Resources (COR) theory and Stressor–Strain–Outcome (SSO) model as the theoretical underpinnings, this study proposes and tests a research model that examines emotional exhaustion as a mediator of the impact of emotional dissonance on service recovery performance, turnover intentions, and absenteeism. The model also investigates the mediating role of emotional dissonance in the relationship between perceived crowding and emotional exhaustion. Data obtained from ground staff in the low cost airline industry in Turkey were used to gauge these relationships. The results from structural equation modeling suggest that passenger crowding as perceived by ground staff results in emotional dissonance that in turn heightens emotional exhaustion. The results further suggest that emotional exhaustion fully mediates the effect of emotional dissonance on turnover intentions and absenteeism. Interestingly, the results suggest that the impact of emotional dissonance on service recovery performance, mediated by emotional exhaustion, is positive. Theoretical and management implications based on the aforesaid findings are discussed in the paper.