Airline efficiency differences between Europe and the US: Implications for the pace of EC integration and domestic regulation

In this paper we examine the performance of the eight largest European and the eight largest American airlines during the period 1976–1986. During this period the American industry was deregulated and the European industry's competitive posture was significantly liberalized. Two alternative methodologies for identifying productive efficiency are used – a parametric one using statistical estimation and a nonparametric one using linear programming. We find that were European carriers under deregulation to be as productively efficient as their American counterparts, the European industry would save approximately $4 billion per year (in 1986 dollars).