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Operational Efficiency In The U.S. Airline Industry: An Empirical Investigation Of Post-Deregulation Era

Author

Listed:
  • Richard A. AJAYI

    () (College of Business, Department of Finance, University of Central Florida, Orlando)

  • Seyed MEHDIAN

    () (School of Management, University of Michigan-Flint, Flint)

  • Vitaly S. GUZHVA

    () (College of Business, Embry-Riddle Aeronautical University)

Abstract

The purpose of this paper is threefold: (1) to examine the operational efficiency of U.S. airlines after the deregulation of 1978; (2) to investigate whether operational efficiency is associated with changes in financial position of firms in the industry and (3) to study if there is an observable pattern in the efficiency measures for large and small airlines. The results indicate that small U.S. airlines record higher scores than large U.S. airlines in four out of five efficiency measures examined. The exception is in the category of allocative efficiency where large airlines exhibit more optimal input mix of resources that their smaller counterparts. This superior mix of resources is consistent with cost minimization. In addition, the analysis shows that higher overall efficiency measures are associated with higher net profit margins of the airlines in the sample, while higher allocative efficiency seems to correlate with higher return on equity."

Suggested Citation

  • Richard A. AJAYI & Seyed MEHDIAN & Vitaly S. GUZHVA, 2010. "Operational Efficiency In The U.S. Airline Industry: An Empirical Investigation Of Post-Deregulation Era," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 6, pages 51-64, December.
  • Handle: RePEc:aic:revebs:y:2011:i:6:ajayir
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    More about this item

    Keywords

    U.S. airlines; efficiency; performance;

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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