Assessment of the relationship between productivity and performance quality in the U.S. Domestic Airline Industry

Output quality in the context of transportation productivity is investigated. The major findings relate to two distinctions: network density versus capacity utilization and productivity versus input cost efficiency. It was found that greater transportation network density is associated with increased productivity, lower output costs, and most interestingly, improved output quality. In contrast, increased capacity utilization is not associated with lower output costs or with improved quality. For the productivity versus efficiency distinction, increased productivity is associated with lower total output costs and greater output quality yet higher input costs. Thus, higher factor input costs can be justified on the basis of output costs and quality advantages. Implications for governmental policy and managerial decision making are that improvements in network density and productivity are more likely to have lasting benefits than are increases in capacity utilization or input efficiency.