New evidences on airline efficiency and yields: a comparative analysis of major North American air carriers and its implications

This paper measures and compares the performance of 10 major North American airlines in terms of residual total factor productivity, cost competitiveness, and residual average yields during the period 1990-2001. Our key findings are: (a) the airlines in North American improved productive efficiency by about 12% between 1990 and 2001 despite the fact that there were substantial reduction of residual TFP between 2000 and 2001; (b) airlines need to perform well in both productive efficiency and pricing to be financially successful; (c) significant productivity improvement in the 1990s enabled the airlines to cope with rising input prices and downward pressure on yields; (d) airlines that aggressively expanded fleet in response to the fast growing market during the mid-1990s have suffered loss in productive efficiency; (e) the 9/11 terrorist attack has led to substantial reductions in airlines' yields, and declining productivity and increasing unit cost.