Network Structures and Resilience of Supply: Insights from the U.S. Airline Industry

This paper explores how firms' network structures are linked to the resilience of their supply. We focus on the U.S. airline industry and leverage different phases of travel restrictions and vaccine rollouts during the COVID-19 pandemic as natural experiments to examine how major carriers' output responses to these unexpected policy shocks are related to their outsourcing strategies on individual routes, encompassing full-scale outsourcing, integration, or a combination of both. Our results indicate that carriers' flight operations are negatively (positively) correlated with travel restrictions (vaccine rollouts). These operational adjustments tend to be made on routes where carriers adopt a hybrid operation strategy, as opposed to routes that are either fully outsourced or fully integrated. Such a tendency allows carriers to promptly and flexibly adapt to unforeseen shocks while ensuring supply resilience.