Cost pass-through in the airline industry: price responses and asymmetries

Shih-Hsien Chuang

Economics Bulletin, 2020, vol. 40, issue 1, 639-652

Abstract: We investigate how fuel cost shocks are passed to air travel fares. Two-staged least squares estimators are used with retail gasoline and crude oil prices employed as instruments. Our results suggest that the cost shock effect on airfare is higher for positive shocks than for negative shocks. Such effect mostly occurs approximately in the same quarter, and then it reaches to the long run equilibrium. The timing of the effect may be explained by ticket purchasing and/or carrier fuel hedging decisions. Significant differentials are found for different business models, slot capacity, service classes, and market structure.

Keywords: Asymmetric responses; Jet fuel; Pass-through; Airline industry (search for similar items in EconPapers)
JEL-codes: L1 L9 (search for similar items in EconPapers)
Date: 2020-02-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I1-P55.pdf (application/pdf)

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:ebl:ecbull:eb-19-00711

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().