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Effects of airline bankruptcies: an event study

Rama K. Jayanti (Department of Marketing, Cleveland State University, Cleveland, Ohio, USA)
S.V. Jayanti (Dateware Technologies Inc., Cleveland, Ohio, USA)

Journal of Services Marketing

ISSN: 0887-6045

Article publication date: 13 September 2011

Abstract

Purpose

The purpose of this paper is to explore the influence of bankruptcies on the market share effects of rival firms in the airline industry.

Design/methodology/approach

Employing event study methodology, the authors examine the impact of bankruptcies on major and minor airlines by analyzing four different types of events: filing for bankruptcy by major carriers; coming out of bankruptcy by major carriers; shutdown by major carriers; and filing of bankruptcy by minor carriers.

Findings

Empirical results indicate that filing for bankruptcy by major carriers and shutdown by major carriers resulted in positive abnormal returns around the announcement dates for rival firms, while coming out of bankruptcy by major carriers resulted in negative impact. As expected, the last type of events involving filing for bankruptcy by minor carriers resulted in insignificant abnormal returns.

Originality/value

The results point to the importance of systematically incorporating bankruptcies by competitive firms in estimating and forecasting market demand. The results provide a diagnostic tool to evaluate what kind of contingencies necessitate planning for unexpected spikes in market share.

Keywords

Citation

Jayanti, R.K. and Jayanti, S.V. (2011), "Effects of airline bankruptcies: an event study", Journal of Services Marketing, Vol. 25 No. 6, pp. 399-409. https://doi.org/10.1108/08876041111160998

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited