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On the Persistent Financial Losses of U.S. Airlines: A Preliminary Exploration


  • Severin Borenstein


U.S. airlines have lost nearly $60 billion (2009 dollars) in domestic markets since deregulation, most of it in the last decade. More than 30 years after domestic airline markets were deregulated, the dismal financial record is a puzzle that challenges the economics of deregulation. I examine some of the most common explanations among industry participants, analysts, and researchers -- including high taxes and fuel costs, weak demand, and competition from lower-cost airlines. Descriptive statistics suggest that high taxes have been at most a minor factor and fuel costs shocks played a role only in the last few years. Major drivers seem to be the severe demand downturn after 9/11 -- demand remained much weaker in 2009 than it was in 2000 -- and the large cost differential between legacy airlines and the low-cost carriers, which has persisted even as their price differentials have greatly declined.

Suggested Citation

  • Severin Borenstein, 2011. "On the Persistent Financial Losses of U.S. Airlines: A Preliminary Exploration," NBER Working Papers 16744, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16744
    Note: IO EFG

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    References listed on IDEAS

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    Cited by:

    1. Hüschelrath, Kai & Müller, Kathrin, 2011. "Low cost carriers and the evolution of the US airline industry," ZEW Discussion Papers 11-051, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. 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.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation


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