Price asymmetries in European airfares

Davide Scotti and Nicola Volta

Economics of Transportation, 2018, vol. 14, issue C, 42-52

Abstract: This research analyses airlines' pricing decisions in response to changes in the market conditions. We estimate the effects of jet fuel price changes on European airfares at airline/route level by discriminating on the grounds of supplied capacity and markets’ competitive structure. Our results show that airlines tend to adjust fares asymmetrically following a “rocket and feather” behaviour. The asymmetric pricing is marked in periods of decreasing capacity when the increases of fuel price are passed at a higher degree than fuel cost savings. In contrast, when capacity increases the asymmetry is lowered. Moreover, we show that highly competitive markets are characterized by a lower price asymmetry compared to low competition markets. Finally, our results show that airline price asymmetry reaches its maximum when capacity is reduced and competition is low.

Keywords: Airlines; Price asymmetry; Pass-through rate; Fuel cost (search for similar items in EconPapers)
JEL-codes: L11 L93 R41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2212012217300837
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:14:y:2018:i:c:p:42-52

DOI: 10.1016/j.ecotra.2018.02.002

Access Statistics for this article

Economics of Transportation is currently edited by Mogens Fosgerau and Erik Verhoef

More articles in Economics of Transportation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().