Baggage Fees and Airline Performance: A Case Study of Initial Investor Misperception

In response to increasing fuel costs, airlines began introducing baggage fees as a new source of revenue, fees which have since been increased. In this study, an event study methodology is used to examine the impact of these announcements on airline stock prices. The results indicate that the initial announcements led to negative abnormal returns for the announcing firm and other competing airlines, as they were interpreted as a sign of industry weakness. However, the results also show that subsequent increases in baggage fees, which had been shown to positively impact the airline’s financial performance, are associated with positive abnormal returns.


Subject(s):
Issue Date:
2011
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/207303
PURL Identifier:
http://purl.umn.edu/207303
Published in:
Journal of the Transportation Research Forum, 51, 1
Page range:
5-18
Total Pages:
15




 Record created 2017-04-01, last modified 2020-10-28

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