US Airline Performance in the Face of Rising Fuel Costs: Is Fuel Efficiency Improvement the Answer?
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2013
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Haverford College. Department of Economics
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eng
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Open Access
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Abstract
The goals of this paper are to determine whether or not increased airline fuel efficiency translates to improved airline financial performance, and to examine the efficacies of various efficiency-improvement strategies. This study uses airline-level panel data compiled from the Bureau of Transportation Statistics and Ascend Worldwide to examine eight major US airlines across 22 years from 1990-2011. Ordinary least squares and fixed effects regression analyses reveal evidence that rising fuel efficiency led to higher operating costs and greater operating revenue, while no significant relationship could be determined between fuel economy and operating profits. Increasing the number of seats per plane, flying longer routes, and raising the proportion of flights that are domestic proved to be the most effective means of raising fuel efficiency.