Effect of slot trading on route-level competition: Evidence from experience in the UK

Abstract

This paper examines the effect of airport slot trading on route-level competition using data on slot trades in the UK. The estimation results suggest that the slot trades among partner carriers contributed to slightly increased competition measured in terms of the number of competitors per route, whereas the slot trades between rival carriers had a negative effect on the number of competitors at the route level. The results suggest that carriers seem to have used the slots obtained from their rivals not to compete with each other but to strengthen their dominance on their existing routes. This behavior is considered to be derived from the bilateral nature of slot trading, which facilitates mutual forbearance among competitors. To cope with the potential anticompetitive effect of mutual forbearance, it would be worthwhile to explore slot-trading schemes that make it harder for carriers to take advantage of multimarket contact as well as alternative methods of primary slot allocation.