IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v77y2019icp24-31.html
   My bibliography  Save this article

Airline service quality and economic factors: An ARDL approach on US airlines

Author

Listed:
  • Stamolampros, Panagiotis
  • Korfiatis, Nikolaos

Abstract

This study examines the impact of interest rates, fuel prices, and market concentration on airline service performance. Rather than focusing on an airline-level analysis, we employ aggregated data from the US Department of Transportation (DOT) and the Airline Consumer Report (ACR) to explore four airline service performance metrics, namely: on-time performance, cancelled flights, mishandled baggage, and passenger's complaints. We gauge the long run effect of the variables of interest using an Autoregressive Distributed Lag bound approach. The findings reveal long-term linkages between airline service levels and the variation in interest rates and market concentration providing new evidence on the trade-off relation between financial pressures and service quality and has practical implications for both regulators and airline managers. Our results are robust to business cycle effects including the great recession.

Suggested Citation

  • Stamolampros, Panagiotis & Korfiatis, Nikolaos, 2019. "Airline service quality and economic factors: An ARDL approach on US airlines," Journal of Air Transport Management, Elsevier, vol. 77(C), pages 24-31.
    • Handle: RePEc:eee:jaitra:v:77:y:2019:i:c:p:24-31
    DOI: 10.1016/j.jairtraman.2019.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699718302801
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2019.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pakdil, Fatma & Aydın, Özlem, 2007. "Expectations and perceptions in airline services: An analysis using weighted SERVQUAL scores," Journal of Air Transport Management, Elsevier, vol. 13(4), pages 229-237.
    2. Gilchrist, Simon & Himmelberg, Charles P., 1995. "Evidence on the role of cash flow for investment," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 541-572, December.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    4. Chen, Ching-Fu & Chang, Yu-Ying, 2008. "Airline brand equity, brand preference, and purchase intentions—The moderating effects of switching costs," Journal of Air Transport Management, Elsevier, vol. 14(1), pages 40-42.
    5. Raghavan, Sunder & Rhoades, Dawna L., 2005. "Revisiting the relationship between profitability and air carrier safety in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 283-290.
    6. Dionne, Georges & Gagne, Robert & Gagnon, Francois & Vanasse, Charles, 1997. "Debt, moral hazard and airline safety An empirical evidence," Journal of Econometrics, Elsevier, vol. 79(2), pages 379-402, August.
    7. Maksimovic, Vojislav & Titman, Sheridan, 1991. "Financial Policy and Reputation for Product Quality," The Review of Financial Studies, Society for Financial Studies, vol. 4(1), pages 175-200.
    8. Shaorui Li & Jing Chen & Bintong Chen, 2016. "Offering a downgraded service to enhance profit?," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 302-311, February.
    9. David A. Matsa, 2011. "Running on Empty? Financial Leverage and Product Quality in the Supermarket Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 137-173, February.
    10. Rico Merkert & James Pearson, 2015. "A Non-parametric Efficiency Measure Incorporating Perceived Airline Service Levels and Profitability," Journal of Transport Economics and Policy, University of Bath, vol. 49(2), pages 261-275, April.
    11. Guzhva, Vitaly S & Pagiavlas, Notis, 2003. "Corporate capital structure in turbulent times: a case study of the US airline industry," Journal of Air Transport Management, Elsevier, vol. 9(6), pages 371-379.
    12. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    13. Michael Mazzeo, 2003. "Competition and Service Quality in the U.S. Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(4), pages 275-296, June.
    14. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521633659, November.
    15. Hussain, Rahim & Al Nasser, Amjad & Hussain, Yomna K., 2015. "Service quality and customer satisfaction of a UAE-based airline: An empirical investigation," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 167-175.
    16. Liou, James J.H. & Tzeng, Gwo-Hshiung, 2007. "A non-additive model for evaluating airline service quality," Journal of Air Transport Management, Elsevier, vol. 13(3), pages 131-138.
    17. Gordon Phillips & Giorgo Sertsios, 2013. "How Do Firm Financial Conditions Affect Product Quality and Pricing?," Management Science, INFORMS, vol. 59(8), pages 1764-1782, August.
    18. Marazzo, Marcial & Scherre, Rafael & Fernandes, Elton, 2010. "Air transport demand and economic growth in Brazil: A time series analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 261-269, March.
    19. Rampini, Adriano A. & Sufi, Amir & Viswanathan, S., 2014. "Dynamic risk management," Journal of Financial Economics, Elsevier, vol. 111(2), pages 271-296.
    20. Steven, Adams B. & Yazdi, Amirhossein Alamdar & Dresner, Martin, 2016. "Mergers and service quality in the airline industry: A silver lining for air travelers?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 1-13.
    21. Hakim, Md Mahbubul & Merkert, Rico, 2016. "The causal relationship between air transport and economic growth: Empirical evidence from South Asia," Journal of Transport Geography, Elsevier, vol. 56(C), pages 120-127.
    22. Greenfield, Daniel, 2014. "Competition and service quality: New evidence from the airline industry," Economics of Transportation, Elsevier, vol. 3(1), pages 80-89.
    23. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    24. Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-894, December.
    25. Samir, Saidi & Shahbaz, Muhammad & Akhtar, Pervaiz, 2018. "The Long-Run Relationship between Transport Energy Consumption and Transport Infrastructure on Economic Growth in MENA Countries," MPRA Paper 85037, University Library of Munich, Germany, revised 06 Mar 2018.
    26. Jin-Woo Park & Rodger Robertson & Cheng-Lung Wu, 2006. "Modelling the Impact of Airline Service Quality and Marketing Variables on Passengers’ Future Behavioural Intentions," Transportation Planning and Technology, Taylor & Francis Journals, vol. 29(5), pages 359-381, July.
    27. Peter Morrell & William Swan, 2006. "Airline Jet Fuel Hedging: Theory and Practice," Transport Reviews, Taylor & Francis Journals, vol. 26(6), pages 713-730, March.
    28. Tretheway, Michael W. & Markhvida, Kate, 2014. "The aviation value chain: Economic returns and policy issues," Journal of Air Transport Management, Elsevier, vol. 41(C), pages 3-16.
    29. Gregory Noronha & Vijay Singal, 2004. "Financial health and airline safety," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(1), pages 1-16.
    30. Wittman, Michael D., 2014. "Are low-cost carrier passengers less likely to complain about service quality?," Journal of Air Transport Management, Elsevier, vol. 35(C), pages 64-71.
    31. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    32. Tsan-Ming Choi & Stein W Wallace & Yulan Wang, 2016. "Risk management and coordination in service supply chains: information, logistics and outsourcing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 159-164, February.
    33. Golbe, Devra L., 1988. "Risk-taking by firms near bankruptcy," Economics Letters, Elsevier, vol. 28(1), pages 75-79.
    34. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521633239, November.
    35. Lim, Siew Hoon & Hong, Yongtao, 2014. "Fuel hedging and airline operating costs," Journal of Air Transport Management, Elsevier, vol. 36(C), pages 33-40.
    36. Saidi, Samir & Shahbaz, Muhammad & Akhtar, Pervaiz, 2018. "The long-run relationships between transport energy consumption, transport infrastructure, and economic growth in MENA countries," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 78-95.
    37. Rose, Nancy L, 1990. "Profitability and Product Quality: Economic Determinants of Airline Safety Performance," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 944-964, October.
    38. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Law, Colin C.H. & Zhang, Yahua & Gow, Jeff & Vu, Xuan-Binh, 2022. "Dynamic relationship between air transport, economic growth and inbound tourism in Cambodia, Laos, Myanmar and Vietnam," Journal of Air Transport Management, Elsevier, vol. 98(C).
    2. Bright Akwasi Gyamfi & Festus Victor Bekun & Daniel Balsalobre-Lorente & Stephen Taiwo ONIFADE & Asiedu Benjamin Ampomah, 2022. "Beyond the environmental Kuznets curve: Do combined impacts of air transport and rail transport matter for environmental sustainability amidst energy use in E7 economies?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(10), pages 11852-11870, October.
    3. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    4. Dehnavi, Morteza Narimani & Yazdian, Seyed Ahmad & Sadjadi, Seyed Jafar, 2023. "Evaluating effective criteria on customer satisfaction using the best-worst method and optimizing resource allocation, case study Iran aseman airlines," Journal of Air Transport Management, Elsevier, vol. 109(C).
    5. Erdogan, Sinan & Fatai Adedoyin, Festus & Victor Bekun, Festus & Asumadu Sarkodie, Samuel, 2020. "Testing the transport-induced environmental Kuznets curve hypothesis: The role of air and railway transport," Journal of Air Transport Management, Elsevier, vol. 89(C).
    6. Li Cheng & Liu Conglin, 2023. "Game analysis and pricing strategy of duopoly airlines based on service," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 14(3), pages 1103-1124, June.
    7. Mollick, André Varella & Amin, Md Ruhul, 2021. "Occupancy, oil prices, and stock returns: Evidence from the U.S. airline industry," Journal of Air Transport Management, Elsevier, vol. 91(C).
    8. Juan Carlos Garmendia-Mora & Lloyd Herbert Morris-Molina, 2022. "Comportamiento de precios en los mercados domésticos de pasajeros del transporte aéreo," Estudios Gerenciales, Universidad Icesi, vol. 38(164), pages 308-319, September.
    9. Anshu Agrawal, 2021. "Sustainability of airlines in India with Covid-19: Challenges ahead and possible way-outs," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(4), pages 457-472, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    2. Caner Demir, 2019. "Macroeconomic Determinants of Stock Market Fluctuations: The Case of BIST-100," Economies, MDPI, vol. 7(1), pages 1-14, February.
    3. Samir Abdelhafidh, 2014. "External Debt and Economic Growth in Tunisia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(6), pages 669-689, December.
    4. Wang, Sen & Gao, Yi, 2021. "A literature review and citation analyses of air travel demand studies published between 2010 and 2020," Journal of Air Transport Management, Elsevier, vol. 97(C).
    5. Angeliki N. Menegaki, 2019. "The ARDL Method in the Energy-Growth Nexus Field; Best Implementation Strategies," Economies, MDPI, vol. 7(4), pages 1-16, October.
    6. Shahiduzzaman, Md. & Alam, Khorshed, 2014. "The long-run impact of Information and Communication Technology on economic output: The case of Australia," Telecommunications Policy, Elsevier, vol. 38(7), pages 623-633.
    7. Hanson, Daniel & Toru Delibasi, Tuba & Gatti, Matteo & Cohen, Shamai, 2022. "How do changes in economic activity affect air passenger traffic? The use of state-dependent income elasticities to improve aviation forecasts," Journal of Air Transport Management, Elsevier, vol. 98(C).
    8. Athanasios Athanasenas & Constantinos Katrakilidis & Emmanouil Trachanas, 2014. "Government spending and revenues in the Greek economy: evidence from nonlinear cointegration," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 365-376, May.
    9. Tanweer Akram & Anupam Das, 2020. "Australian Government Bonds’ Nominal Yields: A Keynesian Perspective," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-20, March.
    10. Adian McFarlane & Young Cheol Jung & Anupam Das, 2020. "The dynamics among domestic saving, investment, and the current account balance in the USA: a long-run perspective," Empirical Economics, Springer, vol. 58(4), pages 1659-1680, April.
    11. Samir Abdelhafidh, 2020. "Does the external debt composition matter for economic growth in Tunisia?," Economics Bulletin, AccessEcon, vol. 40(4), pages 2802-2818.
    12. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
    13. Gordon Phillips & Giorgo Sertsios, 2013. "How Do Firm Financial Conditions Affect Product Quality and Pricing?," Management Science, INFORMS, vol. 59(8), pages 1764-1782, August.
    14. De Vita, G. & Endresen, K. & Hunt, L.C., 2006. "An empirical analysis of energy demand in Namibia," Energy Policy, Elsevier, vol. 34(18), pages 3447-3463, December.
    15. Jin, Wei & Shi, Xunpeng & Zhang, Lin, 2021. "Energy transition without dirty capital stranding," Energy Economics, Elsevier, vol. 102(C).
    16. Hakim, Md Mahbubul & Merkert, Rico, 2019. "Econometric evidence on the determinants of air transport in South Asian countries," Transport Policy, Elsevier, vol. 83(C), pages 120-126.
    17. Ikegami, Masako & Wang, Zijian, 2016. "The long-run causal relationship between electricity consumption and real GDP: Evidence from Japan and Germany," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 767-784.
    18. Sanjay Sehgal & Ritesh Kumar Mishra & Ajay Jaisawal, 2021. "A search for macroeconomic determinants of corporate financial distress," Indian Economic Review, Springer, vol. 56(2), pages 435-461, December.
    19. Merkert, Rico & Swidan, Hassan, 2019. "Flying with(out) a safety net: Financial hedging in the airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 206-219.
    20. Pérez-Granja, Ubay & Pérez-Sánchez, José María & Pérez-Rodríguez, Jorge V., 2024. "Assessing economic performance and aviation accidents using zero-inflated and over-dispersed panel data models," Journal of Air Transport Management, Elsevier, vol. 118(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:77:y:2019:i:c:p:24-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.