Crash landing: Flight price elasticity induced by pandemic across America

Abstract

This study examines the spatial disparity in airfare reductions due to the pandemic for U.S. domestic flights among the top 60 primary airports. It employs a two-step regression analysis to determine the likelihood of airfare reductions and to measure the elasticity of these reductions, as influenced by flight-related, airport-related, and regional attributes. While considerable uncertainty remains regarding the elasticity of flight prices induced by the pandemic, several conclusions can be tentatively drawn. First, at the onset of the pandemic, flight prices did not exhibit significant changes. This initial stability in airfares can be attributed to the industry's initial uncertainty about the pandemic's impact and potentially delayed responses to the rapidly evolving situation. However, as the pandemic progressed, a noticeable impact on airfares became evident. Second, flights of longer duration and higher original prices, as well as airports with high passenger volumes, are more likely to experience reductions in airfares. Third, the economic impact of the pandemic on the aviation industry varies across different regions. Flights departing from the West region show a significant decrease in airfare reductions. The observed disparities in the dynamics of airfare reductions across different U.S. regions highlight the complex interplay of regional characteristics, local pandemic responses, and travel demand in influencing airfare pricing during the pandemic.