Economies of scale in the US airline industry

This study investigates economies of scale in the US airline industry using annual data, from 1987 to 2009, on the largest airlines. The paper estimates both a translog and Cobb–Douglas model of both an economic and transportation definition of economies of scale. The study shows that the results from models based on the two definitions are remarkably similar except during rapid growth in output and that the largest US airlines operate under modest scale economies.

► This study uses a newer and larger data set than used on previous studies. ► Corrects for autocorrelation while using seemingly unrelated regression. ► Examines the difference between economic and transportation definitions of EOS. ► Finds that significant EOS do exist among the top US passenger airlines.