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Why Can't US Airlines Make Money?

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  • Severin Borenstein

Abstract

US airlines have lost nearly $60 billion ($2009) in domestic markets since the 1978 deregulation, most of it in the last decade. The dismal financial record challenges the economics of deregulation. I examine some of the common explanations among industry participants and researchers--including high taxes and fuel costs, weak demand, and competition from lower-cost airlines. Major drivers seem to be the demand downturn after 9/11--demand remains much weaker today than in 2000--and the large cost differential between legacy and low-cost carriers, which has persisted even as the price differential between them has greatly declined.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.233
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 233-37

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:233-37

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  1. Mara Lederman, 2007. "Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1134-1158, December.
  2. Mara Lederman, 2008. "Are Frequent-Flyer Programs a Cause of the "Hub Premium"?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 35-66, 03.
  3. Olivier Armantier & Oliver Richard, 2008. "Domestic airline alliances and consumer welfare," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 875-904.
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Cited by:
  1. Wojahn, Oliver W., 2012. "Why does the airline industry over-invest?," Journal of Air Transport Management, Elsevier, vol. 19(C), pages 1-8.
  2. Akbar, Yusaf & Németh, Adél & Niemeier, Hans-Martin, 2014. "Here we go again…the Permanently Failing Organization: An application to the airline industry in Eastern Europe," Journal of Air Transport Management, Elsevier, vol. 35(C), pages 1-11.

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