A Longitudinal Analysis of Operating Profitability in the U.S. Airline Industry, 1988-2011

Posted: 20 Sep 2013 Last revised: 31 Jul 2014

See all articles by Michael A. Lapre

Michael A. Lapre

Vanderbilt University - Operations Management

Yasin Alan

Vanderbilt University - Operations Management

Gary D. Scudder

Vanderbilt University - Operations Management

Date Written: June 25, 2014

Abstract

What is the impact of operational performance on profitability in the airline industry? We address this question in the context of the domestic U.S. airline industry from 1988 through 2011. The industry consists of (i) focused carriers that provide a limited set of service offerings for a particular market niche within North America, and (ii) legacy carriers who attempt to serve a wide variety of destinations (both continental and intercontinental) and customer segments. We compare and contrast the impact of five determinants of operating profitability – yield, load factor, equipment cost, labor cost, and fuel cost – for legacy carriers and focused carriers across two eras – pre 9/11 and post 9/11. Pre 9/11, focused and legacy carriers differed markedly in terms of managing the primary determinants. However, focused carriers have become more similar to legacy carriers post 9/11.

Keywords: operating profit; yield management; cost structure; productivity; focus; airlines

Suggested Citation

Lapre, Michael A. and Alan, Yasin and Scudder, Gary D., A Longitudinal Analysis of Operating Profitability in the U.S. Airline Industry, 1988-2011 (June 25, 2014). Vanderbilt Owen Graduate School of Management Research Paper No. 2328375. Available at SSRN: https://ssrn.com/abstract=2328375 or http://dx.doi.org/10.2139/ssrn.2328375

Michael A. Lapre

Vanderbilt University - Operations Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-2389 (Phone)
615-343-7177 (Fax)

HOME PAGE: http://www.owen.vanderbilt.edu/faculty-and-research/faculty-directory/faculty-profile.cfm?id=114

Yasin Alan (Contact Author)

Vanderbilt University - Operations Management ( email )

Nashville, TN 37203
United States

Gary D. Scudder

Vanderbilt University - Operations Management ( email )

Nashville, TN 37203
United States

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