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Revisiting the relationship between profitability and air carrier safety in the US airline industry

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  • Raghavan, Sunder
  • Rhoades, Dawna L.

Abstract

Studies have examined the link between financial performance and air carrier safety following deregulation, using accident rates as a measure of safety. These studies have relied on limited post-deregulation data. This paper re-examines these trends with extended post-deregulation data. We find that accident rates since 1978, when normalized over departures, have been increasing, raising concerns that the growth in the industry is dominating safety improvements. Further, this study highlights an inverse relationship between profitability and air carrier safety, especially for the smaller regional air carriers. These results raise important policy implications for the airline industry and the regulatory agencies.

Suggested Citation

  • Raghavan, Sunder & Rhoades, Dawna L., 2005. "Revisiting the relationship between profitability and air carrier safety in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 283-290.
    • Handle: RePEc:eee:jaitra:v:11:y:2005:i:4:p:283-290
    DOI: 10.1016/j.jairtraman.2005.01.003
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    References listed on IDEAS

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    1. Golbe, Devra L, 1986. "Safety and Profits in the Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 305-318, March.
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    Cited by:

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    2. Akyildirim, Erdinc & Corbet, Shaen & O'Connell, John F. & Sensoy, Ahmet, 2021. "The influence of aviation disasters on engine manufacturers: An analysis of financial and reputational contagion risks," International Review of Financial Analysis, Elsevier, vol. 74(C).
    3. Andreas Papatheodorou & Nikos Platis, 2007. "Airline Deregulation, Competitive Environment and Safety," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 221-242, January-F.
    4. Hong, Seock-Jin & Lee, Kang-Seok & Seol, Eun-Suk & Young, Seth, 2016. "Safety perceptions of training pilots based on training institution and experience," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 213-221.
    5. Shao, Pei-Chi & Chang, Yu-Hern & Chen, Hubert J., 2013. "Analysis of an aircraft accident model in Taiwan," Journal of Air Transport Management, Elsevier, vol. 27(C), pages 34-38.
    6. Oster, Clinton V. & Strong, John S. & Zorn, C. Kurt, 2013. "Analyzing aviation safety: Problems, challenges, opportunities," Research in Transportation Economics, Elsevier, vol. 43(1), pages 148-164.
    7. Stamolampros, Panagiotis & Korfiatis, Nikolaos, 2019. "Airline service quality and economic factors: An ARDL approach on US airlines," Journal of Air Transport Management, Elsevier, vol. 77(C), pages 24-31.
    8. Maria Ángeles Alcaide & Alberto Celani & Paula Cervera Chasan & Elena De La Poza, 2022. "Mathematical Modeling of the Financial Impact of Air Crashes on Airlines and Involved Manufacturers," Mathematics, MDPI, vol. 10(5), pages 1-18, February.

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