PRODUCTIVITY DIFFERENCES IN THE AIRLINE INDUSTRY - PARTIAL DEREGULATION VERSUS SHORT-RUN PROTECTION

This paper specifies and estimates a production function for the airli ne industry, identifying firms' network characteristics and efficiency as the main determinants of their productivity. The application of th is analysis to the European market shows that productivity differences among flag carriers could explain the governments' different views ab out deregulation at the beginning of the eighties. The introduction of liberal bilateral agreements by some European governments has given t heir flag carriers incentives to start adjusting their structure in an ticipation of future liberalization in the European market while other European Flag carriers have delayed this adjustment. (C) 1998 Elsevie r Science B.V.