Multifactor productivity change in the air transportation industry: productivity increases in the U.S. airline industry—the Nation's primary intercity mass transportation system—have played a significant role in the industry's cost-containment efforts and its ability to accelerate growth

Monthly Labor Review, March, 2005 by John Duke, Victor Torres

Between 1972 and 2001, the flow of services from capital stock increased rapidly at an average annual rate of 4.2 percent. This growth rate is consistent with a rapid output growth of 4.8 percent per year. Over the same period, the cost of capital services averaged 11.5 percent of total costs (see chart 3.) The share in total costs comprised by capital may seem low. However, airline assets have long service lives; therefore, replacement costs per dollar of stocks are lower than in most other industries. In addition, some "capital" such as airport terminal space is rented and counted in intermediate purchases rather than in capital, although this is not the case for leased aircraft, which are included in the capital input measure. By 2001, capital input had more than tripled from the 1972 level.

Growth in capital input accelerated from a 3.5-percent average annual rise during the 1973-79 period to a 5.3-percent average annual gain from 1979 to 1990. This increase in the growth rate of capital occurred despite a falloff in the growth of output, which dropped from an average increase of 7.6 percent in the first period, to 4.8 percent in the latter period. During the 1970s decade, widebody 'Jumbo' jets--such as Boeing 747s, Douglas DC10s, and Lockheed L1011 Tristars--were introduced into service. With their very large size, the jumbo jets provided economies of scale that allowed for more travelers to fly for a lower cost. The Boeing 747, for example, could seat as many as 490 passengers and reach speeds of up to 604 miles per hour. (33) As the number of jumbo jets in the industry increased in the mid-1970s, the productivity gains that were not related to load factors seem to have been significantly influenced by the expansion of this fleet of large capacity airplanes. (34) The 1970s also saw the introduction of the second generation of jet airliners, such as Airbus' A300-600 and Boeing's 737-100 and 200, for medium and short haul routes. The A300-600, a medium range widebody airliner, featured a two-crew EFIS (Electronic Flight Instrument Systems) cockpit, with digital avionics. (35) During the 1980s, new aircraft were introduced with more powerful but quieter engines. For example, the Boeing 737-300, 737-400, and 737-500--with the CFM56 engine (made by General Electric/Snecma)--were produced.

Other airliners that entered the industry in the 1980s include Boeing's 757 and 767, which were developed in tandem and share a number of systems and technologies--including a common early-generation EFIS flightdeck that integrated the functions of dozens of separate instruments to simplify cockpit scan, thus reducing pilot workload and fatigue. Since their introduction, the evolution of EFIS systems have allowed operators to benefit from more capability, flexibility, and redundancy with increased reliability. (36) Airbus introduced the A310 and the A320. The A320, a short to medium range airliner, is the first plane to introduce a fly-by-wire flight control system, under which control inputs from the pilot are signals rather than mechanical processes. (37) A fly-by-wire system is built to interpret the pilot's intention and translate it into action, a translation process that takes environmental factors into account first. (38) The advantage of this type of system is that it is computer-controlled, making it virtually impossible to exceed certain parameters such as G limits and maximum and minimum operating speeds.