Performance improvement paths in the US airline industry: linking trade-offs to asset frontiers

Several articles have been written during the past few years examining performance improvement paths and various forms of efficiency frontiers in operations strategy. These articles focus primarily on defining and describing these frontiers and raise questions concerning how to improve operations. In this paper, we provide one of the first empirical studies aimed at validating these earlier studies. Using a database on the 10 largest US airlines for a period of 11 years, we test and validate some of the models presented in the operations literature. The 10 major airlines are separated into 2 groups for analysis: geographic specialists and geographic generalists. Our analysis shows that better performing airlines (in terms of cost-quality position) in both groups confirm the predictions of the sand cone model when operating further away from their asset frontiers, although trade-offs do occur when operating close to asset frontiers.