Coordinated Capacity Reductions and Public Communication in the Airline Industry

Federico Ciliberto, Gaurab Aryal () and Benjamin Leyden

No 12730, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate whether legacy U.S. airlines communicated via earnings calls to coordinate with other legacy airlines in offering fewer seats on competitive routes. To this end, we first use text analytics to build a novel dataset on communication among airlines about their capacity choices. Estimates from our preferred specification show that when all legacy airlines in a market discuss the concept of "capacity discipline," they reduce offered seats by 1.79%. We verify that this reduction materializes only when airlines communicate concurrently, and that it cannot be explained by other possibilities, including that airlines are simply announcing to investors their unilateral intentions to reduce capacity, and then following through on those announcements. Additional results from conditional-exogeneity tests and control function estimates confirm our interpretation.

Keywords: Airlines; Communication; Collusion; Capacity discipline; Text data (search for similar items in EconPapers)
JEL-codes: D22 L12 L41 L68 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-big, nep-com, nep-hme, nep-ind, nep-mkt and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Coordinated Capacity Reductions and Public Communication in the Airline Industry (2022)
Working Paper: Coordinated Capacity Reductions and Public Communication in the Airline Industry (2021)
Working Paper: Coordinated Capacity Reductions and Public Communication in the Airline Industry (2020)
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