Commodity price pass-through in the US airline industry and the hidden perks of consolidation

Alexander H. Wolter, Thorsten Ehlers, Klaus Luetjens and Volker Gollnick

Journal of Air Transport Management, 2021, vol. 95, issue C

Abstract: How do changing jet fuel prices impact airline revenues? As expenses for jet fuel are one of the most relevant cost factors for airlines, their economic success largely depends on the ability to match changes on the cost side with an adaption on the revenue side. While previous studies primarily focused on the impact of fuel price changes to consumer prices, this paper empirically examines the ability of US airlines to pass-through lagged jet fuel prices to scaled operating revenues from an airline driven perspective. Our results suggest that the extent to which an exogenous increase in fuel prices can be passed on to revenues will deviate according to the competitive situation faced by an airline. Based on these findings our research should also be of interest for European policy makers who are discussing actions to exogenously increase jet fuel prices due to environmental reasons.

Keywords: Fuel price pass-through; Jet fuel tax; Airline market consolidation; Airline market segmentation; Pass-through under competitive pressure; Asymmetric fuel price pass-through (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:95:y:2021:i:c:s0969699721000831

DOI: 10.1016/j.jairtraman.2021.102100

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