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A Market for Airport Slots

Author

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  • Marra, Marleen

Abstract

Globally, scarce airport capacity is rationed by awarding time-specific slots free of charge to airlines, incentivising retention regardless of efficiency. I quantify the efficiency losses and welfare effects of market-based reallocation, defining slot values as equilibrium profits from a structural flight-level model. Reallocating 6% of weekly slot pairs in two airports increases consumer surplus by at least 3.2% through substitution of under-utilised slots for long-haul flights at suitable hours; fare effects are negligible. Larger operations yield cost and demand advantages and reduce outside hubs as substitutes. This reinforces concentration, but unlike in standard markets, the resulting network convenience benefits consumers at the margin.

Suggested Citation

  • Marra, Marleen, 2024. "A Market for Airport Slots," CEPR Discussion Papers 19442, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:19442
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    File URL: https://cepr.org/publications/DP19442
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions

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