A Market for Airport Slots

Marleen Marra

No 19442, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper assesses the welfare implications of introducing airport slot auctions, while connecting the parallel worlds of demand-supply and auction models. Given the absence of an existing market and available bids, slot values are derived from airlines' additional profits based on a flight-level structural model. This model considers various factors, such as consumer preferences, scheduling efficiencies, and aircraft-specific costs, with a new flight-level dataset facilitating its estimation. Sizeable network benefits are estimated, which carry through to the market-based allocation and skew the resulting slot allocation towards dominant carriers within their hub airports. The network effects also lead to the unconventional result that a quantity cap reduces how much consumers gain from the auction, despite curtailing the market power of the dominant carrier.

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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