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The Impact of Passenger Mix on Load Factors in the Airline Industry

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Listed:
  • James D. Dana

    (Northeastern University)

  • Daniel J. Greenfield

    (Federal Trade Commission)

Abstract

We explore how the dramatic increase in the share of leisure travel has changed aircraft utilization in the U.S. airline industry. We argue that the growth in leisure travel—which is due to increases in household income and to airline deregulation—has been responsible for an increase in airlines’ load factors. Because of data limitations, we use cross-sectional variation in the mix of passenger types to identify the effect of passenger mix on load factors. We find that routes that have a greater share of leisure travelers also have higher load factors. We use this evidence to argue that the growth of leisure travel since airline deregulation is an important driver of aircraft utilization and other characteristics of the U.S. airline industry.

Suggested Citation

  • James D. Dana & Daniel J. Greenfield, 2019. "The Impact of Passenger Mix on Load Factors in the Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 111-127, February.
    • Handle: RePEc:kap:revind:v:54:y:2019:i:1:d:10.1007_s11151-018-9631-2
    DOI: 10.1007/s11151-018-9631-2
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    References listed on IDEAS

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    1. James D. Dana Jr. & Eugene Orlov Jr., 2014. "Internet Penetration and Capacity Utilization in the US Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 106-137, November.
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    3. Darin Lee & María José Luengo-Prado, 2005. "The Impact of Passenger Mix on Reported “Hub Premiums” in the U.S. Airline Industry," Southern Economic Journal, John Wiley & Sons, vol. 72(2), pages 372-394, October.
    4. Kevin R. Williams, 2017. "Dynamic Airline Pricing and Seat Availability," Cowles Foundation Discussion Papers 3003, Cowles Foundation for Research in Economics, Yale University.
    5. Steven Berry & Panle Jia, 2010. "Tracing the Woes: An Empirical Analysis of the Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 1-43, August.
    6. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 239-256, May.
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