Departmental Research Seminar

Competition and Consumer Welfare in Airport Slot Allocation
I study how the current airport slot allocation mechanism affects airline competition and consumer welfare. Currently, airlines are required to use their slots at least 80% to keep them for next year. My central finding is that this requirement leads airlines to add flights that exacerbate congestion, yet it also intensifies competition on major routes. To show this, I build and estimate a structural model of airline demand and route choice using EU data. My estimates show that while some airports cease to be congested if current usage doesn't affect future slot allocations, such a change reduces consumer welfare due to the reduced competition. Furthermore, even if a social planner reallocates slots to maximize consumer surplus, the rule change still causes a substantial welfare loss. This highlights that reforms prioritizing allocative efficiency over this competitive mechanism risk substantial harm to consumers.