Excess capacity: A permanent characteristic of us airlines?

Research output: Contribution to journalArticle

14 Scopus citations

Abstract

This paper examines the permanence of excess capacity in the US airline industry. To avoid the problems with the standard engineering measure of capacity utilization, load factor, we define and measure capacity as an economic concept. Two measures of economic capacity utilization are then computed - one, a demand-based measure and the other an output-based measure of capacity utilization. Both measures share little in common with the standard engineering measure (load factor) and reveal some interesting attributes of airline travel demand. This paper also provides interesting new insights into the role of deregulation and the costs of excess capacity during regulation. Specifically, it is found that deregulation with the concomitant rationalization of route structures enabled airlines to move closer to their optimal levels of capacity and facilitated substantial improvements in capacity utilization and cost reductions over the period considered.

Original languageEnglish (US)
Pages (from-to)645-657
Number of pages13
JournalJournal of Applied Econometrics
Volume13
Issue number6
DOIs
StatePublished - 1998

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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