Competition, Privatisation and Productive Efficiency: Evidence From the Airline Industry

We use data from the airline industry to examine the extent to which the costs of airline operations are affected by rents accruing to workers, and the extent to which these rents depend inter alia upon the degree of competition in the industry. Our empirical results based on a panel of twelve European and seven major United States airlines confirm that state ownership substantially increases rents to labour, while the effects of competition are more subtle and ambiguous; airline profits tend to be associated with higher rents to employees. The gains from further privatisation and liberalisation may be quite large.