Identifying the drivers of profitable airline growth
While regulatory changes in the global economic environment have facilitated airline capacity growth, profitability remains as a challenging issue for airlines globally. This study examines whether the airline business model has an impact on the tension between growth and profits and is the first to...
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| Published in: | Transport policy 2022-01, Vol.115, p.275-285 |
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| Main Authors: | , , |
| Format: | Article |
| Language: | eng |
| Subjects: | |
| Online Access: | Get full text |
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| Summary: | While regulatory changes in the global economic environment have facilitated airline capacity growth, profitability remains as a challenging issue for airlines globally. This study examines whether the airline business model has an impact on the tension between growth and profits and is the first to apply the dynamic system generalised method of moments model to this relationship. We find that full-service network carriers are faced with a trade-off between growth and operating profits, whereas low-cost carriers are able to simultaneously pursue growth-oriented strategies whilst improving profitability. We discuss the key differences in the business models that drive these results and expect that short-term effects of COVID-19 travel constraints will impact different airlines in distinct ways.
•Model the relationship between growth and profitability in airlines using a dynamic panel GMM model.•There exists a trade-off between growth and profitability for full-service carriers.•Low-cost carriers' are able to improve profitability while increasing growth.•Results are robust to endogeneity, geographic regions, and covariation with macroeconomic variables. |
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| ISSN: | 0967-070X 1879-310X |