Abstract
It is important to examine profitability in the aviation sector and the factors that may affect it, due to their relevance for the airlines’ survival. The main purpose of this paper is to analyse the effect of three internal business characteristics,namely labour costs, labour productivity and company size, on airlines’ profitability, considering the airline type as a moderating effect. We have collected data of 190 European airlines during a 10-year period (2004–2013) which allowed us to create an unbalanced panel of 1,364 observations. Four types of airlines are considered. Results show that cost per employee has a positive influence on economic performance, especially for major carriers and regional carriers. It is also confirmed that the carrier type influences the relationship between labour costs, labour productivity and company size on the one hand, and economic returns on the other. These findings are relevant as they improve our understanding of economic profitability in different airlines’ types.
Highlights
Across the years, the airline industry has been the subject of numerous studies in the academic literature
Variance inflation factor (VIF) analyses were conducted for each model, showing maximum values below the upper bound of 10, which suggests the absence of unacceptable multicollinearity
The findings of this study underlined an influence of cost per employee on economic profitability for CHC
Summary
The airline industry has been the subject of numerous studies in the academic literature. These have adopted different perspectives with respect to airline management (Ginieis, Sánchez-Rebull, & Campa-Planas, 2012). The growth rates of air traffic and gross domestic product (GDP) are positively associated (Chin & Tay, 2001). The global air transport industry is still increasing and, in 2014, accounted for 63 million jobs and made a contribution of USD 2.7 trillion (3.5%) to global GDP (ATAG, 2014, 2016). Over the last 55 years, the air transport industry has an average annual growth rate equal to almost 10%, three times that of GDP (Oleshko & Heiets, 2018)
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