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Some comments on the recent study “Tracing the woes: an empirical analysis of the airline industry”

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Author(s): Wellington Carlos Costa

Journal: Journal of Transport Literature
ISSN 2238-1031

Volume: 3;
Issue: 1;
Start page: 68;
Date: 2009;
Original page

Keywords: airlines | profits | air transportation

ABSTRACT
This study aims to review the current situation of the airline industry in the United Stated from the analysis of the recent paper “Tracing the woes: An Empirical Analysis of the Airline Industry”, developed by Steven Berry and Panle Jia (2008). The authors discuss the turmoil in the industry in the early 2000's, denoted by four major bankruptcy, two mergers and all legacy carriers reporting profit reduction. The study estimates the impact of demand and supply evolution on profitability using a structural model of the US airline industry. As a result, they found that air travel demand has become more price-sensitive and passengers have now a strong preference for nonstop flights. At the end the results showed significant changes of marginal cost benefited from the nonstop flights.
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