Three Essays in Aviation Economics

Robert Hazel

Major Professor: Alex T Tabarrok, PhD, Department of Economics

Committee Members: Garett Jones, Todd Zwycki

Carow Hall, Conference
April 10, 2019, 01:30 PM to 03:30 PM

Abstract:

My dissertation consists of three articles on different aspects of aviation. The abstract for each article follows.

  1. Airline Capacity Discipline in the U.S. Domestic Market. 

Using data from 1996 to 2015, this study examines airline capacity growth in the U.S. domestic market. The study finds that, after controlling for the strength of the economy and the price of fuel, decreases in total domestic airline capacity have been strongly correlated with increases in total domestic revenue. The study also finds that the industry's use of the real GDP growth rate as the focal point for capacity growth may help airlines maintain or slightly increase unit revenue over time. Finally, the study finds that, in the aftermath of U.S. airline consolidation (during 2011–2015), the average growth rate of domestic capacity has been lower than in the past and, while individual airlines continue to add capacity at different rates, the variation between airlines has been lower than in the past. Whether this restraint will continue is an open question.

  1. Privacy and Trade Secret Law Applied to Drones: An Economic Analysis.

The growing number of commercial and consumer drones, combined with their ability to fly quietly at low altitudes with cameras and other monitoring equipment, raises concerns about privacy and property rights. This article focuses on two questions. First, how will the balancing of privacy concerns and the interests of drone operators influence the emergence of new rules governing vertical property rights? Second, given the large volume of drone operations, must privacy and trade secret law change to continue to fulfill their original economic purpose?  An economic analysis of intrusion upon seclusion and trade secret law helps answer these questions.

  1. Explaining an Outlier – Why does the U.S. System of Airport Governance and Economic Regulation Persist?

Unlike airports in many other countries which have been privatized or corporatized, nearly all U.S. airports continue to be operated by the public sector and subject to a system of economic regulation that provides little incentive to control costs or allocate capital efficiently. Yet despite its apparent shortcomings, the current system has persisted over several decades. This article offers an economic theory and supporting evidence for this equilibrium and identifies several factors that might lead public-sector airport owners to adopt privatization. The article analyzes data from 61 U.S. airports and includes case studies of three attempted airport privatizations in the U.S.