Tobin’s q and Airline Performances

Abstract

This article studies the performance of the global airline industry by applying Tobin’s q, a financial market-based measure of firm value, as the primary measure. With 27 airlines from Asia Pacific, Europe, and North America over the period of 1989 to 1999 we find that the industry on average is a low q ratio industry, and European carriers generally have lower q values relative to their counterparts in the other two regions. There is a general pattern of low correlation between q and other financial measures except the variable of price-to-book-value ratio, indicating that Tobin’s q captures additional dimensions of the airline performances. Applying a regression model, we find significant relationships between q and some operational variables and economic factors of the industry.