The Effects of Employee Hours-of-Service Regulations on the U.S. Airline Industry

59 Pages Posted: 16 Jan 2018 Last revised: 25 Aug 2018

See all articles by Alexander Luttmann

Alexander Luttmann

University of California, Irvine

Cody Nehiba

University of California, Irvine

Date Written: August 14, 2018

Abstract

Maximum employee work-hour restrictions are made to reduce accidents. However, because they decrease the stock of work-hours available to employers, they also have unintended consequences. A quasi-experiment suggests that pilot hours-of-service reforms, which decreased the number of flights and hours a pilot may work, reduced consumer choice and increased fares in the airline industry. We find that regional and low-cost carriers reduced flight frequency, while less constrained legacy carriers (and their wholly owned subsidiaries) were unaffected. Further, we find evidence that market concentration increased on many routes, implying that fare increases may be due to a decrease in competition.

Keywords: Hours-of-Service, Airlines, Labor Regulations, Vertical Integration, Competition

JEL Classification: J22, J28, L93, R48

Suggested Citation

Luttmann, Alexander and Nehiba, Cody, The Effects of Employee Hours-of-Service Regulations on the U.S. Airline Industry (August 14, 2018). Available at SSRN: https://ssrn.com/abstract=3099918 or http://dx.doi.org/10.2139/ssrn.3099918

Alexander Luttmann (Contact Author)

University of California, Irvine ( email )

Irvine, CA
United States

Cody Nehiba

University of California, Irvine ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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