Does the fuel-conservation effect of higher fuel prices appear at both the aircraft-model and aggregate airline levels?

Abstract

This paper asks whether the fuel conservation effect of high fuel prices found by Brueckner and Abreu (2017) still emerges in a regression that contains a much finer set of controls for airline fleet characteristics. The regressions relate annual fuel use by individual aircraft models at each airline to the available ton miles (ATM) for that model as well as average stage length and load factor (measured by weight) for the model. Dummy variables for the different models are also included, being interacted with the current fuel price. As in Brueckner and Abreu (2017), who used aggregate data for entire airlines, the results show that fuel usage at the aircraft-model level rises with ATM and load factor and falls with stage length. In addition, a higher fuel price reduces fuel usage for the most popular narrowbody aircraft models, showing that a fuel conservation effect is still present in this more disaggregated empirical model. This conclusion reaffirms the short-term benefits from a fuel tax, which arise from fuel conservation efforts, holding fleet characteristics fixed.