How Do Slot Restrictions Affect Airfares? New Evidence from the US Airline Industry

Hideki Fukui ()
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Hideki Fukui: Ehime University

Chapter Chapter 5 in Aviation Policies, 2025, pp 155-204 from Springer

Abstract: Abstract This chapter examines the impact of slot restrictions as a determinant of scarcity rent. I took advantage of an exogenous regulatory change—the removal of slots at Newark Airport in October 2016. The results from the difference-in-differences estimation, with and without the use of propensity score matching or weighting methods, suggest that after the slot removal, the average fare on routes to or from Newark decreased by about 2.5–2.6% compared to the average fare on routes to or from the other two slot-controlled New York-area airports. Modified model estimates suggest that the key factor driving fare reductions on Newark routes was the behavior of non-dominant carriers, although even United Airlines, the dominant carrier at Newark, appeared to make price cuts in response to other carriers’ aggressive pricing on competitive routes. Overall, the results suggest that slot restrictions reduce the effect of competition in lowering airfares.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-96-7303-2_5

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DOI: 10.1007/978-981-96-7303-2_5

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