Effect of innovation on airlines' operating leverage: A Spanish case study

This article assesses potential variations in the risk to an airline's market value resulting from incurring high investments in innovations. This can be important for airlines, whose large fixed costs and high operational leverage make their commercial viability heavily dependent on revenue flows. An empirical application in Spain shows that innovations lead to an increase in an airline's risk, via volatility, but this variation is not the same for all types of innovation: advanced consumer segmentation innovations are found to have a greater impact on sales than on fixed costs. (C) 2012 Elsevier Ltd. All rights reserved.