RESEARCH PROPOSAL

Research Proposal

Research Proposal

Abstract

The impact of unionization on airline efficiency is found to be statistically insignificant, controlling for the influences of other hypothesized determinants of airline efficiency: the average age of an airline's fleet, the average size of its aircraft, its average stage length. In this research paper, I will explain how the labor relationship has affected the airline industry and how unions improve or hinder the operational efficiency of the airline.

Research Question

How the labor relationship has affected the airline industry and how unions improve or hinder the operational efficiency of the airline.

Introduction

Airline labor unions are often blamed, especially by airline management, for undermining airline efficiency, but do they actually do this? This paper examines this question by assessing the impact of labor unions on the technical efficiency of airlines. Technical efficiency, which is sometimes referred to as X-efficiency, has to do with minimizing the quantities of physical inputs used to produce a unit of physical output, given the existing state of production technology. The output of an airline's production process is available seat-miles (ASMs), where an ASM is one seat flown one mile, whether occupied by a passenger or not. The conversion of an airline's produced inventory of ASMs into revenue passenger-miles is a marketing function, not part of the airline's production process. For the purposes of this analysis, an airline's inputs are labor, fuel, and fleet-wide seating capacity. This study measures how efficiently each airline in the dataset transforms these three inputs into ASMs. Once this is done, the paper then seeks to determine whether the degree of unionization of an airline's employees affects its efficiency.

Literature Review

A number of articles using DEA and tobit regression models to evaluate the determinants of airline efficiency have recently appeared. Examples include (Schefczyk, 1993), (Fethi et al., 2002), (Scheraga, 2004), (Chiou and Chen, 2006) and (Scheraga, 2006). Additional studies have applied DEA to the airline industry without using tobit regression analysis to ascertain the determinants of airline efficiency. Examples of these papers include (Banker and Johnston, 1994), (Coelli et al., 2002), (Sickles et al., 2002), (Capobianco and Fernandez, 2004), (Ray, 2004b), (Greer, 2006) and (Greer, 2008). One shortcoming of many of the aforementioned studies is that they tend to measure the input and output variables in their monetary values.

Gittell et al. (2004), whose concerns are the most similar to the ones here, focus specifically on the airline industry and examine ...