Abstract
We investigate if general economic conditions influence aviation safety across the whole sector. Specifically, the study explores the relationship among aviation accidents and incidents for Part 121 US commercial airlines with fuel prices, stock market volatility, industrial production growth, and treasury bill rates. Our findings suggest that most of the variables under consideration exhibit a strong association with airline safety. Importantly, we examine two plausible channels that may explain these results; managerial decisions and the effect on “human factor”. Analysis of airline financial data, health, and safety violations, along with airline employee satisfaction levels, suggests that it is more likely that the economy influences aviation safety through managerial decisions. This study confirms theoretical predictions about reductions on firms’ quality standards in periods of financial stress and liquidity constraints. The findings of the study have important implications for regulators and other stakeholders.
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