Effects of the use-it-or-lose-it rule on airline strategy and climate

Till Kösters, Marlena Meier and Gernot Sieg
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Marlena Meier: Institute of Transport Economics, Muenster

No 36, Working Papers from Institute of Transport Economics, University of Muenster

Abstract: Grandfather rights require airlines to operate at least 80% of their slots, if they are to keep them in the next scheduling period. To prevent losing slots, the airlines may operate slot-rescue flights, an airline strategy called slot hoarding. We model strategies of a monopolistic airline which chooses between long-haul and short-haul flights at a slot-coordinated airport. In cases of a binding use-it-or-lose-it rule, we observe a bias in the airline route network in favor of slot-rescue flights on short-haul distances. Slot-rescue flights reduce airline profits, but raise consumer surplus and airport profits. The overall effect of slot-rescue flights on welfare, however, remains ambiguous. Recently, slot hoarding and its climate impact have received considerable attention during the COVID-19 pandemic. We show that the environmental effects of slot-rescue flights are asymmetric. The climate damage of slot hoarding in the EU is reduced by the EU ETS, whereas CORSIA is rather ineffective.

Keywords: Use-it-or-lose-it rule; Slot hoarding; Climate damage; EU ETS; CORSIA; COVID-19 (search for similar items in EconPapers)
JEL-codes: L93 Q51 R48 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2023-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-ind, nep-reg and nep-tre
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