THE CAPITAL-MARKET RESPONSE TO WAGE NEGOTIATIONS IN THE AIRLINES

This paper examines the effect of the announcement of various types of airline wage concessions on stock market value. Our results show that capital markets respond positively to wage cuts but not significantly to wage freezes or two-tier settlements. However, a significant intra industry spillover effect from two-tier agreements was found that sugg ests that concessions by one carrier decreases the value of the remain ing carriers. The results also vary by craft, indicating that labor ma rket and institutional characteristics influence market response.