Modeling the impact of fuel price on the utilization of piston engine aircraft

Abstract

In the United States, piston engine aircraft play an important role in the General Aviation. However, the utilization of piston engine aircraft - measured by the average number of hours of use every year - has been declining during the past decade. It is believed that the decline is partially due to the high fuel price. The objective of this paper is to evaluate the impact of fuel price on the utilization of piston engine aircraft. Our contribution is twofold: 1) we used an econometric model to investigate the impact of fuel price on the utilization rate of piston engine aircraft; 2) we adopted a logistic model to identify the relationship between fuel price and the status of a piston engine aircraft (i.e., the possibility of staying active in the fleet). To provide more insight, model calibrations and analyses are done for single-engine piston engine aircraft, multi-engine piston aircraft, and piston aircraft (i.e., the combination of the two groups), respectively. We found that the relative fuel price, i.e., fuel price to personal income ratio, has a significant impact on the utilization of piston engine aircraft. The elasticity of utilization rate with respect to the relative fuel price is -0.67 for single-engine piston aircraft, -0.23 for multi-engine piston aircraft, and -0.6 for all piston engine aircraft combined. A one-unit increase in the relative fuel price could decrease the odds of staying active by 1.91% for single-engine piston aircraft, 1.43% for multi-engine piston aircraft, and 1.78% for all piston engine aircraft. Using the two models, we estimate the utilization of piston engine aircraft under three future fuel price scenarios: a reference fuel price scenario, a high fuel price scenario, and a low fuel price scenario. We compared our projections with those performed by the Federal Aviation Administration (FAA). For single-engine piston aircraft and piston engine aircraft, the FAA's projections are close to our projections under reference fuel price scenario. For multi-engine piston aircraft, the FAA's projections are close to our projections under high fuel price scenario.