Systematic and Idiosyncratic Risks of the U.S. Airline Industry

Abstract

Understanding the risky nature of the airline industry has received attention in the tourism literature from separate angles. Although the systematic risk of the airline industry has been examined before, idiosyncratic risk has largely been ignored. This study fills this gap in the tourism literature by investigating the effect of passengers’ air travel on systematic and idiosyncratic risks of the U.S. airline industry. Using historical air travel data and utilizing both OLS and fixed-effect models, this paper documents negative relationships between the occupancy of airline seats and idiosyncratic risks for 21 U.S. airline companies. This negative effect of occupancy is more pronounced if air travel distances are shorter, companies have lower leverage ratios, and companies are smaller in size. Policy implications for both airline managers and investors are provided.

Business Strategy and CEO Compensation: Evidence from the Hospitality and Tourism Industry*

“…We follow Bhuyan et al . (2022) to measure the Idiosyncratic risks of the HT industry. Correia et al .…”

“…Comparable to the baseline regression, we utilize turnover and investment as additional control measures with the same control variables and heteroskedasticity robust standard errors in this estimation. We follow Bhuyan et al (2022) to measure the Idiosyncratic risks of the HT industry. Correia et al (2018) demonstrate that fundamental asset…”