NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Severin Borenstein

NBER Working Paper No. 16744
Issued in January 2011
NBER Program(s):   IO   EFG

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.

download in pdf format
   (358 K)

email paper

A non-technical summary of this paper is available in the July 2011 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (358 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Users who downloaded this paper also downloaded these:
Borenstein and Rose How Airline Markets Work…Or Do They? Regulatory Reform in the Airline Industry
Borenstein and Rose w13452 How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry
Berry and Barwick w14503 Tracing the Woes: An Empirical Analysis of the Airline Industry
Goolsbee and Syverson w11072 How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines
Qian w16785 Counterfeiters: Foes or Friends? How Do Counterfeits Affect Different Product Quality Tiers?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us