Profit Margins in U.S. Domestic Airline Routes

Transport Policy, Forthcoming

103 Pages Posted: 16 Sep 2019 Last revised: 15 Oct 2021

See all articles by HAKAN YILMAZKUDAY

HAKAN YILMAZKUDAY

Florida International University (FIU) - Department of Economics

Date Written: October 14, 2021

Abstract

This paper estimates profit margins in the U.S. airline industry at the domestic route level. The dynamic estimation methodology used not only is robust to any simultaneity/endogeneity bias by construction but also results in profit margin estimates that are highly consistent with actual profit data from the U.S. airline industry. Estimated annual profit margins have an average of about 13.3%, with a range between 2.7% and 42.9% across routes. A cross-route analysis further suggests that annual profit margins increase with the market share of the largest airline serving the route, whereas they decrease with airfare. Important policy suggestions follow.

Keywords: Profit Margin, Price Elasticity U.S. Domestic Routes

JEL Classification: C32, L93

Suggested Citation

Yilmazkuday, Hakan, Profit Margins in U.S. Domestic Airline Routes (October 14, 2021). Transport Policy, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3449509 or http://dx.doi.org/10.2139/ssrn.3449509

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

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