THE STUDY NOVEMBER 29, 2011
News broke this morning that AMR Corporation, the parent company of American Airlines, has gone belly-up. The company said today that it doesn’t expect frequent flyer programs or flight schedules to be affected. But will the long-term impact be different?
According to a 2003 paper by two economists, airline bankruptcies actually have a rather limited overall impact on air travel. The authors surveyed airline bankruptcies dating back to 1984 and noted that from a customer’s perspective, what matters is not the number of flights offered by a given airline, but the total number of flights available. They found that when the number of flights offered by one airline plummets, the other carriers generally increase their service in response. The only customers likely to experience a notable decline in service, it turns out, are those using medium-sized airports. And unfortunately, travelers from those locations were already getting squeezed: Many of the nation’s medium-size airports (in places like Memphis, Cincinnati, Charleston, Des Moines, and Little Rock) rank among the most overpriced airports in the country.