Premium
Does vertical integration affect firm performance? Evidence from the airline industry
Author(s) -
Forbes Silke J.,
Lederman Mara
Publication year - 2010
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2010.00120.x
Subject(s) - business , adaptation (eye) , vertical integration , affect (linguistics) , aviation , adverse weather , interlining , industrial organization , transport engineering , operations management , economics , engineering , meteorology , linguistics , philosophy , physics , optics , aerospace engineering
We investigate the effects of vertical integration on operational performance. Large U.S. airlines use regional partners to operate some of their flights. Regionals may be owned or governed through contracts. We estimate whether an airline's use of an owned, rather than independent, regional at an airport affects delays and cancellations on the airline's own flights out of that airport. We find that integrated airlines perform systematically better than nonintegrated airlines at the same airport on the same day. Furthermore, the performance advantage increases on days with adverse weather and when airports are more congested. These findings suggest that, in this setting, vertical integration may facilitate real‐time adaptation decisions.