Fare impacts of a regulatory change in takeoff and landing restrictions: The case of Newark Liberty Airport

Abstract

The regulatory change in takeoff and landing restrictions that occurred at Newark Liberty Airport provides an opportune set of conditions to study the effect of a plausibly exogenous shock to airfares. In 2016, the Federal Aviation Administration changed Newark Liberty’s classification from Level 3 to Level 2 (less restrictive designation). In order to isolate the policy impact on airfares, we compare airfare changes in markets that include Newark as endpoint with markets that do not. These markets are analyzed before and after the policy event with a special emphasis on United Airlines which controlled 73% of the slots at Newark. While airfares declined overall, the airfare gap between the Newark and non-Newark markets suggests that Newark airfares were shielded from the full extent of the airfare decrease, resulting in a lesser decline than would have been anticipated in the absence of the regulatory change.