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Productivity? of US Airlines After Deregulation

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  • R. Färe
  • S. Grosskopf
  • R. C. Sickles

Abstract

We analyse a sample of airline firms most recently examined by Alam and Sickles (2000) and extended by Good, Sickles and Weiher (2005) to include an index of circuity as one of our measures of service quality of airline travel. An additional measure of quality of airline travel is timeliness and is measured by FAA data on the percentage of flights that arrived on time. The two traditional outputs are scheduled and non-scheduled revenue passenger miles. We find that accounting for characteristics such as circuity and percentage of flights arriving on time does affect productivity. Our findings confirm anecdotal accounts of a decline in airline service quality since deregulation, yielding in general lower rates of productivity growth in our sample when quality variables such as indirect routeing and delays are explicitly introduced into the technology. Our findings also point out the power of index number techniques to account for service quality changes and could serve a similar function in analysing post-deregulatory dynamics in other industries such as telecommunications, electric power, distribution and financial services. © 2007 LSE and the University of Bath

Suggested Citation

  • R. Färe & S. Grosskopf & R. C. Sickles, 2007. "Productivity? of US Airlines After Deregulation," Journal of Transport Economics and Policy, University of Bath, vol. 41(1), pages 93-112, January.
  • Handle: RePEc:tpe:jtecpo:v:41:y:2007:i:1:p:93-112
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    Cited by:

    1. Zou, Bo & Elke, Matthew & Hansen, Mark & Kafle, Nabin, 2014. "Evaluating air carrier fuel efficiency in the US airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 59(C), pages 306-330.
    2. Aguirregabiria, Victor & Ho, Chun-Yu, 2012. "A dynamic oligopoly game of the US airline industry: Estimation and policy experiments," Journal of Econometrics, Elsevier, vol. 168(1), pages 156-173.
    3. Yu, Ming-Miin & Chang, Yu-Chun & Chen, Li-Hsueh, 2016. "Measurement of airlines’ capacity utilization and cost gap: Evidence from low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 186-198.
    4. repec:eee:transa:v:106:y:2017:i:c:p:197-214 is not listed on IDEAS
    5. Duygun, Meryem & Kutlu, Levent & Sickles, Robin C., 2014. "Measuring Productivity and Efficiency: A Kalman," Working Papers 15-010, Rice University, Department of Economics.
    6. Meryem Duygun & Levent Kutlu & Robin C. Sickles, 2016. "Measuring productivity and efficiency: a Kalman filter approach," Journal of Productivity Analysis, Springer, vol. 46(2), pages 155-167, December.
    7. Chen, Yongmin & Gayle, Philip, 2013. "Mergers and Product Quality: Evidence from the Airline Industry," MPRA Paper 51238, University Library of Munich, Germany.
    8. Lee, Chia-Yen & Johnson, Andrew L., 2012. "Two-dimensional efficiency decomposition to measure the demand effect in productivity analysis," European Journal of Operational Research, Elsevier, vol. 216(3), pages 584-593.
    9. Barbot, Cristina & Costa, Ã lvaro & Sochirca, Elena, 2008. "Airlines performance in the new market context: A comparative productivity and efficiency analysis," Journal of Air Transport Management, Elsevier, vol. 14(5), pages 270-274.
    10. repec:eee:retrec:v:66:y:2017:i:c:p:12-25 is not listed on IDEAS

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