A Market for Airport Slots

Marleen Marra

No 19442, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Globally, scarce airport capacity is rationed by awarding time-specific slots free of charge to airlines, incentivising retention regardless of efficiency. I quantify the efficiency losses and welfare effects of market-based reallocation, defining slot values as equilibrium profits from a structural flight-level model. Reallocating 6% of weekly slot pairs in two airports increases consumer surplus by at least 3.2% through substitution of under-utilised slots for long-haul flights at suitable hours; fare effects are negligible. Larger operations yield cost and demand advantages and reduce outside hubs as substitutes. This reinforces concentration, but unlike in standard markets, the resulting network convenience benefits consumers at the margin.

Keywords: Airline industry; Structural estimation; Airports; Auctions; Demand estimation (search for similar items in EconPapers)
JEL-codes: C57 D44 L13 L93 (search for similar items in EconPapers)
Date: 2024-09
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