Safety and the economic and financial performance in the airline industry: is there any relationship?
Abstract
Safety has always been and is a key management aspect in the airline industry. Airline companies, airport management, aviation staff and air traffic control perform the impossible to ensure the lowest possible number of accidents and incidents for minimizing the number of fatalities.
The main objective of this paper is first, to determine and analyze literature published concerning safety in the airline business and, second, to see the relationship between safety and other related economic and financial indicators. The sample used is a collection of international airlines included in the JACDEC safety index, considering longitudinal data for the years 2011−2015.
The results revealed a non-significant effect for safety on the profitability of the airline companies, whereas a significant effect of safety on airlines’ revenues was shown.
Keyword : safety management, airline companies, profitability, key performance indicators, JACDEC
How to Cite
Kalemba, N., & Campa-Planas, F. (2019). Safety and the economic and financial performance in the airline industry: is there any relationship?. Aviation, 23(1), 7-14. https://doi.org/10.3846/aviation.2019.9744
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Morrison, S. A., & Winston, C. (1995). The evolution of the airline industry. The Bookings Institution, Washington D.C.
Moses, L. N., & Savage, I. (1990). Aviation deregulation and safety: theory and evidence. Journal of Transport Economics and Policy, 24, 171-188.
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Oum, T. H., & Yu, C. (1998). An analysis of profitability of the world’s major airlines. Journal of Air Transport Management, 4, 229-237. https://doi.org/10.1016/S0969-6997(98)00023-4
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R Development Core Team R. (2016). A language and environment for statistical computing. Vienna, Austria: R Foundation for Statistical Computing. Retrieved from https://www.R-project-org
Rhoades, D. L., & Waguespack Jr, B. (1999). Better safe than service? The relationship between service and safety quality in the US airline industry. Managing Service Quality, 9(6), 396-400. https://doi.org/10.1108/09604529910304143
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Rose, N. L. (1990). Profitability and product quality: Economic determinants of airline safety performance. Journal of Political Economy, 98, 944-964. https://doi.org/10.1086/261714
Rose, N. L. (1992). Fear of flying? Economic analysis of airline safety. Journal of Economic Perspectives, 6(2), 75-94. https://doi.org/10.1257/jep.6.2.75
Shappell, S., Detwiler, C., Holcomb, K., Hackworth, C., Boquet, A., & Wiegmann, D. A. (2007). Human error and commercial aviation accidents: an analysis using the human factors analysis and classification system. Human Factors, 49(2), 227-242. https://doi.org/10.1518/001872007X312469
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Stolzer, A. J., & Goglia, J. J. (2015). Safety management systems in aviation (2nd ed.). Ashgate.
Talley, W. K. (1992). The impact of deregulation on airline safety: profit-safety and market-response arguments. Paper presented at the International Conference Series on Competition and Ownership in Land Passenger Transport. Retrieved from https://hdl.handle.net/2123/12193
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Vasigh, B., Tacker, T., & Fleming, K. (2013). Introduction to air transport economics: from theory to applications. Burlington, VT: Ashgate.
World Bank. (2015). Retrieved March 21, 2017 from https://www.datos.bancomundial.org
World Health Organization. (2015). Global status report on road safety. WHO.
Airline Ratings. (2014). Retrieved March 2, 2017 from https://www.airlineratings.com
Air Transport Action Group. (2014). Retrieved March 14, 2017 from https://www.atag.org
Amalberti, R. (2001). The paradoxes of almost totally safe transportation systems. Safety Science, 37, 109-126. https://doi.org/10.1016/S0925-7535(00)00045-X
Arhall, J., & Cox, E. (2013). Key performance indicators for SAS flights. Linköping University.
De Jager, W. C. (1993). The effects of airline deregulation on airline safety: an econometric analysis (Doctoral dissertation). Retrieved from https://pdxscholar.library.pdx.edu/cgi/view-content.cgi?article=2296&context=open_access_etds
Dempsey, P. S., & Goetz, A. R. (1992). Airline deregulation and laissez-faire mythology. Westport, CT: Quorum Books.
Dionne, G., Gagné, R., Gagnon, F., & Vanasse, C. (1997). Debt, moral hazard and airline safety. An empirical evidence. Journal of Econometrics, 79, 379-402.
EASA Annual Safety Review 2014. (2015). European aviation safety agency, 2015. Retrieved from https://www.easa.europa.eu/newsroom-and-events/news/annual-safety-review-2014
Golbe, D. (1986). Safety and profits in the airline industry. The Journal of Industrial Economics, 34(3), 305-318. https://doi.org/10.2307/2098573
Huang, J. (2009). Aviation safety and ICAO. Universiteit Leiden.
International Air Transport Association. (2014, 2015). Retrieved June 21, 2017 from https://www.iata.org
International Civil Aviation Organization. (2001). Determination of a definition of aviation safety (Working paper No. ANWP/7699). Retrieved from https://www.icao.int
International Civil Aviation Organization. (2011). Situación de la seguridad operacional de la aviación mundial (Information Paper). Retrieved from https://www.icao.int/safety/Documents/ICAO_State-of-Global-Safety_web_SP.pdf
International Civil Aviation Organization. (2014). Second high-level safety conference 2015 (HLSC 2015) planning for global aviation safety improvement (Information Paper). Retrieved from https://www.icao.int/Meetings/HLSC2015/Documents/WP/wp102_rev_en.pdf
International Civil Aviation Organization. (2015). Safety report 2015 edition. Retrieved from https://www.icao.int/safety/documents/icao_safety_report_2015_web.pdf
JACDEC. (2014). Retrieved June 24, 2017 from https://www.jacdec.de
Jacobson, R. (1987). The validity of ROI as a measure of business performance. The American Economic Review, 77(3), 470-478.
Just, O. (2014). Vorwort. In J. A. Richter & C. Wolf (Eds.), Mayday, feuer an bord. Schwarze tage der Luftfahrt. GeraMond.
Kahn, A. (2002). Airline deregulation. In The Concise Encyclopedia of Economics. Library Economics Liberty. Retrieved January 15, 2017 https://www.econlib.org
Kalemba, N., & Campa-Planas, F. (2017). Safety as a management concept in the air transport sector: A systematic literature review. Intangible Capital, 13(1), 71-93. https://doi.org/10.3926/ic.918
Kelemen, Z. (2003). Latest information technology development in the airline industry. Periodica Polytechnica Transportation Engineering, 31(1-2), 45-52.
Liao, M. Y. (2015). Safety Culture in commercial aviation: Differences in perspective between Chinese and Western pilots. Safety Science, 79, 193-205. https://doi.org/10.1016/j.ssci.2015.05.011
Liou, J. J. H., Tzeng, G. H., & Chang, H. C. (2007). Airline safety measurement using a hybrid model. Journal of Air Transport Management, 13, 243-249. https://doi.org/10.1016/j.jairtraman.2007.04.008
Liou, J. J. H., Yen, L., & Tzeng, G. H. (2008). Building an effective safety management system for airlines. Journal of Air Transport Management, 14(1), 20-26. https://doi.org/10.1016/j.jairtraman.2007.10.002
Lofquist, E. A. (2010). The art of measuring nothing: The paradox of measuring safety in a changing civil aviation industry using traditional safety metrics. Safety Science, 48(10), 1520-1529. https://doi.org/10.1016/j.ssci.2010.05.006
Madsen, P. M. (2013). Perils and profits: A reexamination of the link between profitability and safety in U.S. Aviation. Journal of Management, 39(3), 763-791. https://doi.org/10.1177/0149206310396374
McFadden, K. L., & Hosmane, B. S. (2001). Operations safety: an assessment of a commercial aviation safety program. Journal of Operations Management, 19, 579-591. https://doi.org/10.1016/S0272-6963(01)00062-6
Miller, T., Douglass, J., & Pindus, N. (1994). Road injury: Causes, costs, and comparisons with other transport modes. Journal of Safety Research, 25(4), 183-195. https://doi.org/10.1016/0022-4375(94)90043-4
Morrison, S. A., & Winston, C. (1995). The evolution of the airline industry. The Bookings Institution, Washington D.C.
Moses, L. N., & Savage, I. (1990). Aviation deregulation and safety: theory and evidence. Journal of Transport Economics and Policy, 24, 171-188.
Oster Jr., C. V., Strong, J. S., & Zorn, C. K. (2013). Analyzing aviation safety: Problems, challenges, opportunities. Research in Transportation Economics, 43, 148-164. https://doi.org/10.1016/j.retrec.2012.12.001
Oum, T. H., & Yu, C. (1998). An analysis of profitability of the world’s major airlines. Journal of Air Transport Management, 4, 229-237. https://doi.org/10.1016/S0969-6997(98)00023-4
Pacheco, R. R., Fernandes, E., & Domingos, E. M. (2014). Airport airside safety index. Journal of Air Transport Management, 34, 86-92. https://doi.org/10.1016/j.jairtraman.2013.08.007
Raghavan, S., & Rhoades, D. L. (2005). Revisiting the relationship between profitability and air carrier safety in the US airline industry. Journal of Air Transport Management, 11, 283-290. https://doi.org/10.1016/j.jairtraman.2005.01.003
R Development Core Team R. (2016). A language and environment for statistical computing. Vienna, Austria: R Foundation for Statistical Computing. Retrieved from https://www.R-project-org
Rhoades, D. L., & Waguespack Jr, B. (1999). Better safe than service? The relationship between service and safety quality in the US airline industry. Managing Service Quality, 9(6), 396-400. https://doi.org/10.1108/09604529910304143
Richter, J. A. (2014). The JACDEC data base. User guide explanations and definitions. JACDEC Gbr.
Roelen, A. L. C., & Klompstra, M. B. (2012). The challenges in defining aviation safety performance indicators. Paper presented at the PSAM 11 & ESREL 2012, 25-29 June 2012. Helsinki, Finland.
Rose, N. L. (1990). Profitability and product quality: Economic determinants of airline safety performance. Journal of Political Economy, 98, 944-964. https://doi.org/10.1086/261714
Rose, N. L. (1992). Fear of flying? Economic analysis of airline safety. Journal of Economic Perspectives, 6(2), 75-94. https://doi.org/10.1257/jep.6.2.75
Shappell, S., Detwiler, C., Holcomb, K., Hackworth, C., Boquet, A., & Wiegmann, D. A. (2007). Human error and commercial aviation accidents: an analysis using the human factors analysis and classification system. Human Factors, 49(2), 227-242. https://doi.org/10.1518/001872007X312469
Skytrax. (2016). Retrieved February 22, 2017 from https://www.airlinequality.com
Stepanyan, A. (2014). Traditional ratio analysis in the airline business: a case study of leading U.S carriers. International Journal of Advances in Management and Economics, 3(2), 175-189.
Stolzer, A. J., & Goglia, J. J. (2015). Safety management systems in aviation (2nd ed.). Ashgate.
Talley, W. K. (1992). The impact of deregulation on airline safety: profit-safety and market-response arguments. Paper presented at the International Conference Series on Competition and Ownership in Land Passenger Transport. Retrieved from https://hdl.handle.net/2123/12193
Thomson Reuters. (2016). Eikon database. Retrieved from https://www.customers.thomsonreuters.com/eikon/?
Vasigh, B., Tacker, T., & Fleming, K. (2013). Introduction to air transport economics: from theory to applications. Burlington, VT: Ashgate.
World Bank. (2015). Retrieved March 21, 2017 from https://www.datos.bancomundial.org
World Health Organization. (2015). Global status report on road safety. WHO.