DP19442 A Market for Airport Slots
This paper assesses the welfare implications of introducing airport slot auctions, while connecting the parallel worlds of demand-supply and auction models. Given the absence of an existing market and available bids, slot values are derived from airlines' additional profits based on a flight-level structural model. This model considers various factors, such as consumer preferences, scheduling efficiencies, and aircraft-specific costs, with a new flight-level dataset facilitating its estimation. Sizeable network benefits are estimated, which carry through to the market-based allocation and skew the resulting slot allocation towards dominant carriers within their hub airports. The network effects also lead to the unconventional result that a quantity cap reduces how much consumers gain from the auction, despite curtailing the market power of the dominant carrier.
