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An Economic Analysis of U.S Airline Fuel Economy Dynamics from 1991 to 2015

Author

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  • Matthew E. Kahn
  • Jerry Nickelsburg

Abstract

Airline transport generates a growing share of global greenhouse gas emissions but as of late 2016, this sector has not faced U.S. fuel economy or emissions regulation. At any point in time, airlines own and lease a set of durable vehicles and have invested in human and physical capital and an inventory of parts to maintain these vehicles. Each airline chooses whether to scrap and replace airplanes in their fleet and how to utilize and operate their fleet of aircraft. We model these choices as a function of real jet fuel prices. When jet fuel prices are higher, airlines fly fuel inefficient planes slower, scrap older fuel inefficient planes earlier and substitute miles flown to their more fuel efficient planes.

Suggested Citation

  • Matthew E. Kahn & Jerry Nickelsburg, 2016. "An Economic Analysis of U.S Airline Fuel Economy Dynamics from 1991 to 2015," NBER Working Papers 22830, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22830
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    File URL: http://www.nber.org/papers/w22830.pdf
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    References listed on IDEAS

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    1. Alessandro Gavazza, 2011. "Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft," Journal of Political Economy, University of Chicago Press, vol. 119(2), pages 325-377.
    2. Li, Shanjun & Kahn, Matthew E. & Nickelsburg, Jerry, 2015. "Public transit bus procurement: The role of energy prices, regulation and federal subsidies," Journal of Urban Economics, Elsevier, vol. 87(C), pages 57-71.
    3. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, vol. 103(1), pages 220-256, February.
    4. Christopher R. Knittel, 2012. "Reducing Petroleum Consumption from Transportation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 93-118, Winter.
    5. Severin Borenstein, 1992. "The Evolution of U.S. Airline Competition," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 45-73, Spring.
    6. Molly Espey & Santosh Nair, 2005. "Automobile Fuel Economy: What Is It Worth?," Contemporary Economic Policy, Western Economic Association International, vol. 23(3), pages 317-323, July.
    7. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    8. Gosnell, Greer & Metcalfe, Robert & List, John A, 2016. "A new approach to an age-old problem: solving externalities by incenting workers directly," LSE Research Online Documents on Economics 84331, London School of Economics and Political Science, LSE Library.
    9. Brueckner, Jan K. & Lee, Darin & Singer, Ethan S., 2013. "Airline competition and domestic US airfares: A comprehensivereappraisal," Economics of Transportation, Elsevier, vol. 2(1), pages 1-17.
    10. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, February.
    11. Gruenspecht, Howard K, 1982. "Differentiated Regulation: The Case of Auto Emissions Standards," American Economic Review, American Economic Association, vol. 72(2), pages 328-331, May.
    12. Mark R. Jacobsen & Arthur A. van Benthem, 2015. "Vehicle Scrappage and Gasoline Policy," American Economic Review, American Economic Association, vol. 105(3), pages 1312-1338, March.
    13. Brueckner, Jan K. & Abreu, Chrystyane, 2017. "Airline fuel usage and carbon emissions: Determining factors," Journal of Air Transport Management, Elsevier, vol. 62(C), pages 10-17.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Some Airplane Energy Demand Economics
      by Matthew Kahn in Environmental and Urban Economics on 2016-12-01 22:55:00

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    Cited by:

    1. Gosnell, Greer & Metcalfe, Robert & List, John A, 2016. "A new approach to an age-old problem: solving externalities by incenting workers directly," LSE Research Online Documents on Economics 84331, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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