Cost Competitiveness of Airlines: An International Comparison

Significant structural, institutional and regulatory changes have occurred in the airline industry since the mid-1980s. These changes have intensified competition in both domestic and international air transport market. As the market becomes more competitive, the ultimate ability of a carrier to survive and prosper depends greatly on its cost competitiveness. This paper measures and compares the unit cost competitiveness of the world's major airlines, using the yearly panel data of 23 major airlines over the 1986-93 period. We focus our analysis on identifying the potential factors which influence the observed unit cost differentials among airlines, including input prices, productivity, network and other firm-specific variables.