What drives airline operating margins? the impacts of ownership, business model and institutions

Ian R. Douglas

Research output: ThesisDoctoral Thesis

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The airline industry delivers a poor return on its invested capital. The industry's regulatory framework, a perishable product, rivalry based on price competition, vulnerability to volatile fuel prices, and low switching costs for customers contribute to the industry's poor margins. Domestic deregulation began in the United States in the 1970's. Deregulation and privatisation followed in Europe, Australasia, and much of Asia, but international aviation remains bound by institutions. Low cost airline innovation has expanded the industry's business models but not its institutions. Many major airlines in Southeast Asia and the Middle East remain state owned. This thesis reports research on airline strategy and the impacts of state-ownership and institutions on airline operating margins. The quality of institutions is found to have a greater impact on strategy outcomes than ownership. The study finds that reduced regulation is more likely to improve operating margins than further privatisation. Permitting consolidation through cross-border mergers, adopting multi-lateral market access agreements, and imposing global limits on state aid to airlines are identified as issues for policy development and further research.
Original languageEnglish
QualificationDoctor of Business Administration
Awarding Institution
  • Charles Sturt University
  • Tilbrook, Kerry, Co-Supervisor
  • O'Neill, Grant, Co-Supervisor
Award date08 Nov 2011
Place of PublicationAustralia
Publication statusPublished - 2011
Externally publishedYes


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