OPERATIONAL EFFICIENCY IN THE U.S. AIRLINE INDUSTRY: AN EMPIRICAL INVESTIGATION OF POST-DEREGULATION ERA

The purpose of this paper is threefold: (1) to examine the operational efficiency of U.S. airlines after the deregulation of 1978; (2) to investigate whether operational efficiency is associated with changes in financial position of firms in the industry and (3) to study if there is an observable pattern in the efficiency measures for large and small airlines. The results indicate that small U.S. airlines record higher scores than large U.S. airlines in four out of five efficiency measures examined. The exception is in the category of allocative efficiency where large airlines exhibit more optimal input mix of resources that their smaller counterparts. This superior mix of resources is consistent with cost minimization. In addition, the analysis shows that higher overall efficiency measures are associated with higher net profit margins of the airlines in the sample, while higher allocative efficiency seems to correlate with higher return on equity."