Technological Innovation in the Airline Industry: The Impact of Regional Jets
This paper explores the impact of the regional jet (RJ), an important new technological innovation in the airline industry, on service patterns and service quality. The evidence shows that RJs were used to provide service on a large number of new hub-and-spoke (HS) and point-to-point (PP) routes. In addition, they replaced discontinued jet and turboprop service on many HS routes, as well as supplementing continuing jet service on such routes. When replacement or supplementation by RJs occurred, passengers benefited from better service quality via higher flight frequencies. The paper's theoretical analysis predicts that the frequency advantage of RJs over jets, a consequence of their small size, should have led to the emergence of PP service in thin markets where such service was previously uneconomical. However, the evidence contradicts this prediction, showing that markets attracting new PP service by RJs had demographic characteristics similar to those of markets that already had jet PP service or attracted it after 1996.
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02-0112, University of Illinois at Urbana-Champaign, College of Business.
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