Sales promotions and firm valuation in the airline industry

Abstract

While prior research has shown that sales promotions can erode firm value in industries such as hotels or enhance it in restaurants, their impact in the airline industry remains underexplored despite the strategic use of promotions in this sector. Using an event study methodology, we analyze 369 promotional announcements issued by major publicly traded U.S. passenger airlines from 2000 to 2024. The results show that, on average, promotional activities generate positive and significant abnormal returns, suggesting that investors perceive them as strategic components of revenue management rather than as distress signals. Further analysis reveals that volume discounts, in particular, produce significantly higher abnormal returns than other promotion formats, highlighting their superior signaling and behavioral reinforcement mechanisms. These findings contribute to the marketing-finance interface by demonstrating that not all promotions are equally effective in signaling strategic competence to investors, emphasizing the need to account for promotion type in valuation studies.