01664287

Component

https://doi.org/10.1177/0361198118792337

Studies assessing the impact of market-based environmental policies in aviation rely on various scenarios of airline cost pass-through, because there is little empirical evidence with respect to the impacts of airline costs on airfares. Instead, the costs effect has been indirectly measured by proxy variables such as distance, fuel price, and aircraft sizes. This paper provides empirical evidence of airline cost pass-through by developing an airfare model that explicitly captures airline operating costs. Using a feasible generalized two-stage least squares (FG2SLS) approach, we obtained coefficients of airline fuel costs per passenger, non-fuel costs per passenger, and non-fuel costs per flight modeling for seven world regions (20 region-pair markets). A comparison of the estimated cost pass-through elasticities conducted across regional markets suggests that airlines may respond to the cost increases differently, depending on the cost types and the markets they operate in. Based on the estimated coefficients, we systematically evaluate the potential impacts of introducing a carbon tax policy within two major regional markets with distinct cost pass-through elasticities.

18-04368

English

pp 146-157

2018-12

Transportation Research Record: Journal of the Transportation Research Board

Digital/other

Figures (3) ; Maps; References (32) ; Tables (2)

Air quality management; Airlines; Aviation; Carbon dioxide; Carbon taxes; Elasticity (Economics); Environmental policy; Exhaust gases; Fares; Least squares method; Markets; Mathematical models; Operating costs; Pricing; Regional economics

Aviation; Economics; Finance; Planning and Forecasting; Policy

TRIS, TRB, ATRI

Jan 8 2018 11:04AM

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