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Cost convergence in the US airline industry: An analysis of unit costs 1995–2006

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  • Tsoukalas, Gerassimos
  • Belobaba, Peter
  • Swelbar, William

Abstract

Recent changes in the strategies of US airlines have led to a convergence of unit costs between the network legacy carriers and low-cost carriers. We develop a methodology for breaking down operating cost data reported by the airlines and argue that certain cost categories must be excluded to make a valid comparison between the carrier groups. We find significant evidence of convergence in unit costs excluding fuel and transport-related expenses, and labor unit costs in particular. While network legacy carriers have improved cost efficiency through dramatic labor cost reductions and longer stage length flying, low-cost carriers labor unit costs continue to increase as these former new entrant airlines mature.

Suggested Citation

  • Tsoukalas, Gerassimos & Belobaba, Peter & Swelbar, William, 2008. "Cost convergence in the US airline industry: An analysis of unit costs 1995–2006," Journal of Air Transport Management, Elsevier, vol. 14(4), pages 179-187.
    • Handle: RePEc:eee:jaitra:v:14:y:2008:i:4:p:179-187
    DOI: 10.1016/j.jairtraman.2008.04.005
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