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This chapter provides a survey of alternative methodologies for measuring and comparing productivity and efficiency of airlines, and reviews representative empirical studies. The survey shows the apparent shift from index procedures and traditional OLS estimation of production and cost functions to stochastic frontier methods and Data Envelopment Analysis (DEA) methods over the past three decades. Most of the airline productivity and efficiency studies over the last decade adopt some variant of DEA methods. Researchers in the 1980s and 1990s were mostly interested in the effects of deregulation and liberalization on airline productivity and efficiency as well as the effects of ownership and governance structure. Since the 2000s, however, studies tend to focus on how business models and management strategies affect the performance of airlines. Environmental efficiency now becomes an important area of airline productivity and efficiency studies, focusing on CO₂ emission as a negative or undesirable output. Despite the fact that quality of service is an important aspect of airline business, limited attempts have been made to incorporate quality of service in productivity and efficiency analysis.

This chapter investigates the effects of economic development, FDI, trade barriers, product characteristics, and air transport network connectivity on both air trade and air cargo demand. The analysis applies gravity model and estimates the air trade and air cargo demand models using seemingly unrelated regressions based on data for the air cargo markets between the United States and its top 61 trading partner countries during the 2004–2019 period. By developing and incorporating “investment distance” as a determining factor in the estimation of air trade, our study fills the gap in literature and sheds light on the importance of air cargo transport in enabling and facilitating the rapid growth of global value chains in recent decades. The results suggest that higher level of FDI between the US and its trading partner countries helps stimulate air trade. Moreover, we also develop several network centrality metrics and examine their relationship with regional air connectivity, which in turn has a positive impact on air cargo traffic. Further analysis using Granger causality tests provides strong evidence supporting the importance of air cargo services as an engine for economic growth and international trade in a dynamic global economic landscape.

The continued rise in e-commerce has contributed to recent growth of the air cargo industry. In addition, international demand for low volume-high value products as well as time-sensitive goods continues to enhance demand for air cargo services. This volume consists of 11 chapters exploring whether this transportation sector has positioned itself to successfully take advantage of the economic opportunities associated with changing global demand for goods and demand for timely transportation services. Areas of analysis cover costs and competitiveness, shipper services and air cargo demand, along with international competition and economic development. Employing various empirical techniques and theoretical perspectives, these chapters help the reader to understand the methods by which air cargo companies provide efficient and increasingly affordable services, and also how the use of these services enhances economic growth and development.