Coordinated Capacity Reductions and Public Communication in the Airline Industry

Gaurab Aryal (), Federico Ciliberto and Benjamin Leyden

The Review of Economic Studies, 2022, vol. 89, issue 6, 3055-3084

Abstract: We investigate the allegation that legacy US 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 the number of offered seats is 2 lower when all legacy airlines in a market discuss the concept of “capacity discipline.” We verify that this reduction materializes only when legacy airlines communicate concurrently, and that it cannot be explained by other possibilities, including that airlines are simply announcing to investors their unilateral plans to reduce capacity, and then following through on those announcements.

Keywords: Airlines; Communication; Collusion; Capacity discipline; Text data; D22; L13; L41; L93 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Related works:
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)
Working Paper: Coordinated Capacity Reductions and Public Communication in the Airline Industry (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:89:y:2022:i:6:p:3055-3084.

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