Journal of Transportation Management


Over the last decade, the U.S. airline industry has transformed itself through mergers, restructurings, bankruptcies, and dissolutions. Also during this time, the airline industry focused on a business model that was driven by an emphasis on asset utilization. This was driven by increasing the load factor to increase cost efficiencies through economies of scale so that the return on invested capital could be improved by reducing the operating costs. This study evaluates economies of scale and resultant cost efficiencies in the U.S. passenger airline industry for the period 2013 to 2018. The research finds that the airline industry is experiencing cost efficiencies with every increase in the size of the airline, but cost efficiencies are not evenly distributed. The paper also finds that the main source of cost efficiency appears to be aircraft maintenance expenses.