Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19

The airline industry is a large, fast-growing global service sector that supports trade, tourism and economic development, but it is capital intensive and historically exhibits returns below its cost of capital. Following deregulation and greater reliance on stock markets, value creation and shareholder wealth maximisation have become central concerns for airline managers and investors. Despite numerous reviews in the air transport domain, there has been no comprehensive synthesis of determinants of firm value for airlines. This study aims to map and synthesise the academic literature on firm valuation in air transport, examining how research has evolved, identifying dominant research directions and value drivers, documenting a shift toward sustainability themes, and outlining research gaps. The authors pose five research questions: (a) How has the literature on firm value evolved in the air transport industry? (b) What are the main research directions relating to firm value in the industry? (c) What are the main influential factors of firm value in the industry? (d) In what context has the research focus shifted from traditional value drivers to sustainability initiatives? (e) What are niches for forthcoming investigations? The purpose is to provide a multidisciplinary overview, connect perspectives, and inform both scholarship and managerial practice, especially given the Covid-19 crisis that drastically reduced demand and destroyed stakeholder value.

The state-of-the-art section reviews the airline business environment, valuation concepts, and internal and external determinants of market value. Airline sector: Air transport enables global connectivity and contributes to economic growth and globalisation, yet many carriers struggle to earn returns above their weighted average cost of capital. Efficiency, brand image, and scale matter, and deregulation increased competition and risk exposure. Firm value concepts: Market value reflects investors’ expectations and can diverge from book value; the book-to-market ratio and models such as Fama-French highlight size and value effects. Persistent gaps between book and market values have spurred interest in intangibles as value drivers and in better disclosure. Internal factors: Prior work (e.g., Malighetti et al., 2011) identifies financial metrics (revenues, margins, ROE, ROIC, leverage, cash flow, R&D), ownership structure (concentration, identity), control variables (age, size, country), and industry-specific measures (passengers, load factor, routes, network characteristics, market share). Ownership concentration tends to be positively related to market value, while firm size and age can be negatively related. External factors: Airlines are sensitive to political, economic and social conditions, government policy and regulation, and exogenous shocks (oil prices, financial crises, disasters, terrorism, health crises). Contagion effects across markets and industries are common, and events such as SARS and Covid-19 have caused sharp declines in demand and stock values. The literature underscores the need for strategies that leverage internal strengths and mitigate external risks.

Design: Systematic literature review (SLR) following CRD (2009) and Denyer & Tranfield (2009) to minimise bias and synthesise dispersed evidence on airline firm valuation. Databases and tools: Scopus and Web of Science Core Collection (Clarivate) were queried; analysis conducted with R (biblioshiny), VOSviewer, and Microsoft Excel. Search strategy: Keywords combined using Boolean operators to capture valuation in the airline context: book value OR market value OR firm value OR stock market OR valuation* AND air transport* OR airline OR aviation. Inclusion criteria: Peer-reviewed journal articles addressing book value, market value, valuation or related performance measures for airlines; subject areas included business, economics, management, transportation, business finance, hospitality and tourism, and environmental studies (to cover sustainability and firm performance links). Exclusions: Non-articles (books, conference papers, reviews, etc.), non-relevant subject areas, and studies not on airline valuation. Screening and sample: Initial total 572 records (331 Scopus, 241 WoS). After removing 57 duplicates, 515 remained. Exclusions: 163 non-articles, 111 not in subject area, 68 not on airline valuation. Final sample: 173 peer-reviewed articles from 1984 to 2021. Analyses: Descriptive bibliometrics (temporal evolution, top journals, citations, geography, co-authorship) and keyword co-occurrence maps; thematic analysis (manual classification) identifying seven main strands: industry-level characteristics, firm-level value influencers, sustainability, customer relationship and marketing, international political and economic instability, new methods to predict share price, and health crises.

Descriptive trends: 173 eligible articles (1984–2021). Publication activity increased notably between 2008–2018 (91 papers; 52% of the sample) with renewed growth in 2020–2021 due to Covid-19; 39 papers were published in the last three years of the window. Journal outlets: Journal of Air Transport Management led with 23 papers and 126 citations; Transportation Research Part E had 7 papers; highly cited finance journals also featured individual influential articles. Most cited article: Kang et al. (2010) on CSR in hospitality (312 citations). Geography: USA (62 papers) and China (30) led; 74% of output originated from North America and Europe. Collaboration: Co-authorship networks are sparse; the largest cluster includes authors such as Zhang A, Hu Q, Zhang Y, Czerny A, with generally weak interconnections. Keywords: Sixteen frequent terms (min frequency 4) formed five clusters; airline, value/valuation, finance/stock market, management, and performance dominated. Thematic findings: • Industry-level characteristics (≈37 papers): Market structure, alliances, M&A, oil price shocks, inter-industry competition, crashes, strikes, bankruptcy events, and slot policy significantly affect stock values. Oil price increases raise costs, depress profits and stock returns; risk exposures vary over time and by business model. Alliance formations and terminations elicit stock market reactions; large-fatality crashes depress both focal and rival airlines’ values, whereas small-scale crashes can increase rivals’ prices. • Firm-level value influencers (≈36 papers): Business model matters; full-service carriers tend to outperform low-cost carriers during crises. Hedging is generally associated with higher firm value, improved income predictability and operating performance; route announcements can yield positive abnormal returns, with earlier entrants gaining more. Launching mobile apps was associated with an average 1.32% increase in shareholder returns. Leasing choices affect LCC profitability more than full-service carriers. CEO tenure/education influence risk-taking; wage cuts can raise stock prices; bankruptcy sharply reduces value (e.g., Eastern Airlines’ value dropped by over 50% during bankruptcy). • Sustainability (≈31 papers): Environmental and governance initiatives tend to correlate positively with market value; evidence on the social pillar is mixed. Passenger willingness to pay for carbon offsets depends on attributes such as emissions reduced, environmental consciousness, demographics and travel habits; highlighting co-benefits can increase uptake. Innovation can increase risk via volatility depending on type. Despite rising academic attention, only about 38% of top airlines publish sustainability reports. • Customer relationship and marketing: Higher customer satisfaction links to better profitability and market value; demand segments differ in price sensitivity (business vs tourist). Social media negative word of mouth influences firm value and can propagate across brands. Effective frequent flyer and overbooking policies can enhance returns. • International political and economic instability: Terrorist attacks produce strong short-term negative valuation effects, with smaller, less diversified airlines more affected. Brexit-related uncertainty depressed stock prices with partial reversals as uncertainty cleared. The global financial crisis increased return volatility across airlines. • New methods to predict share price: Studies introduced and applied valuation and prediction frameworks (e.g., PCA with RNNs, DEA-based network models, option pricing, DCF, hybrid AI), offering improved forecasting and supporting investment, financing, and asset acquisition decisions. • Health crises (SARS, Covid-19): Covid-19 triggered unprecedented stock price declines in airlines, larger than overall market drops. Sensitivity depends on cost structure and firm characteristics; larger cash reserves, higher market-to-book ratios and lower leverage mitigated losses, while higher leverage exacerbated declines. Event-study and GARCH analyses underscore the need for timely policy support (tax relief, guarantees) and managerial responses.

The review addresses the research questions by documenting the evolution of airline valuation research, identifying dominant themes and value drivers, and showing a recent shift toward sustainability and crisis-related work. Industry- and firm-level determinants remain the largest strands, but sustainability-related research and health crisis analyses expanded, especially post-2020. The findings suggest that market value is jointly shaped by internal levers (business model, hedging, network decisions, governance and disclosure) and external shocks (oil prices, regulation, political and economic instability, pandemics). The shift toward sustainability reflects investor and stakeholder demand for resilience and responsible practices, potentially acting as an insurance-like mechanism during crises. However, gaps remain between academic emphasis and practice, as many airlines do not report sustainability comprehensively. For managers, the results imply prioritising robust risk management (e.g., dynamic hedging, liquidity buffers, leverage discipline), strategic network and alliance decisions, customer satisfaction initiatives, and credible sustainability programs. For policymakers, the evidence points to the importance of targeted, timely support during systemic shocks and policies encouraging energy efficiency, emissions reductions and transparent ESG disclosure. Methodologically, advances in modelling and prediction can improve valuation accuracy and aid decision-making under uncertainty.

This paper systematically maps and synthesises 173 studies on firm value in the airline industry (1984–2021), integrating bibliometric and thematic analyses. It identifies seven main research strands—industry-level characteristics, firm-level value influencers, sustainability, customer relationship and marketing, international political and economic instability, new methods to predict share price, and health crises—and documents temporal shifts in attention, particularly toward sustainability and pandemic-related topics since 2020. The study contributes a structured knowledge base that links theoretical constructs with empirical evidence and highlights the leading journals, countries and collaboration patterns. Practical implications include guidance for managers on value drivers and risk mitigation (e.g., hedging, liquidity, business model choices, ESG integration) and for policymakers on designing crisis support and sustainability policies. Future research directions include: expanding multi-country, multi-airline samples; developing structural models incorporating governance and route-level competition; quantifying the causal impacts and economic magnitudes of specific ESG initiatives; refining crisis-response frameworks; and advancing predictive models combining fundamental and technical features.

The SLR is limited by the keyword set and database scope (Scopus and Web of Science Core Collection only), which may miss relevant studies using different terminology or indexed elsewhere. Screening excluded studies deemed not directly related, potentially narrowing scope. Many included works analyse small samples or single airlines, limiting generalisability. Further, the reviewed empirical designs often face data and model constraints when estimating crisis effects or ESG impacts. Future reviews could employ literature-exploration algorithms, include additional databases (e.g., JCR and others), expand samples, and develop new models to better measure policy effectiveness, oil-related exposures, and cross-country differences in crisis responses.