Brattle economists have recently published an article in the Review of Industrial Organization that examines the competitive impacts of exchanges and sales of airport landing slots. Concentration of airport landing slots has been a key competitive concern in recent U.S. airline mergers, and slot allocation policies are under review in various jurisdictions worldwide.
The authors of the study use a model of oligopoly behavior where airlines allocate landing slots optimally to different routes subject to an overall slot limit, and subject to the slot allocation decisions made by their rivals. They find that increased concentration of slot holdings may be harmful to overall consumer or social welfare, although consumers on “thin” routes may gain air transportation service as a result. The overall impacts on consumers and route allocation decisions are influenced by the extent of route-specific fixed costs, where large route-specific costs may reverse some of these findings.
The article, “Competitive Effects of Exchanges or Sales of Airport Landing Slots,” was written by Brattle principal James Reitzes, senior associate Nicholas Powers, and research analysts Brendan McVeigh and Samuel Moy. A copy of the article is available for download below and the final publication is available here.View Article