IDEAS home Printed from
   My bibliography  Save this paper

Do Airline Bankruptcies Reduce Air Service?


  • Severin Borenstein
  • Nancy L. Rose


The airline industry's current financial crisis has raised concerns over the ramifications of airline bankruptcies for air service and the economy. Such bankruptcies, however, nearly always occur when demand is weak, and, thus, when even healthy airlines are inclined to reduce flights. Moreover, from a consumer and policy perspective, the real concern is total air service offered, not the number of flights offered by a particular airline. We study all major U.S. airline bankruptcies since 1984 in order to estimate the effect of bankruptcy on air service, controlling for demand fluctuations and recognizing that competing airlines may increase service in response to a reduction in flights by a bankrupt airline. We do not find substantial effects of bankruptcy on flights offered or destinations served at large and small airports, but do find an impact at medium sized airports. We estimate, however, that service changes due to bankruptcy are not large in comparison to typical quarter-to-quarter fluctuations in service that occur at airports in the absence of carrier bankruptcies.

Suggested Citation

  • Severin Borenstein & Nancy L. Rose, 2003. "Do Airline Bankruptcies Reduce Air Service?," NBER Working Papers 9636, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9636
    Note: IO

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Hendel, Igal, 1996. "Competition under Financial Distress," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 309-324, September.
    2. Gregor Andrade & Steven N. Kaplan, 1998. "How Costly is Financial (Not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed," Journal of Finance, American Finance Association, vol. 53(5), pages 1443-1493, October.
    3. Chevalier, Judith A, 1995. "Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry," American Economic Review, American Economic Association, vol. 85(3), pages 415-435, June.
    4. Matthias Kahl, 2002. "Economic Distress, Financial Distress, and Dynamic Liquidation," Journal of Finance, American Finance Association, vol. 57(1), pages 135-168, February.
    5. Pulvino, Todd C., 1999. "Effects of bankruptcy court protection on asset sales," Journal of Financial Economics, Elsevier, vol. 52(2), pages 151-186, May.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Severin Borenstein & Nancy L. Rose, 2003. "The Impact of Bankruptcy on Airline Service Levels," American Economic Review, American Economic Association, vol. 93(2), pages 415-419, May.
    2. Lee, Hwa Ryung, 2009. "Bankruptcies and low-cost Carrier Expansion in the Airline Industry," Department of Economics, Working Paper Series qt8g8639tn, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Lee, Hwa Ryung, 2009. "Does Bankruptcy Protection Harm the Airline Industry?," Department of Economics, Working Paper Series qt0s40v0x9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9636. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.