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Papers by Volodymyr Bilotkach

Are airports engines of economic development? A dynamic panel data approach

Urban Studies, 2015

Chapter 4 A Guide to Booking Airline Tickets Online

Advances in Airline Economics, 2012

Introduction to special issue “Pricing and regulation in the airline industry”

Research in Transportation Economics, 2014

SSRN Electronic Journal, 2000

This paper uses example of Ukraine to explore the issue of national airlines' strategies on the g... more This paper uses example of Ukraine to explore the issue of national airlines' strategies on the global deregulated airline market. Ukraine's case is unusual in a sense that the country currently has two main national carriers, which do not directly compete on any international route. The carriers' success on the global deregulated market requires a well-established and structured network, which none of the two carriers can offer at this time. We suggest that an alliance between the two carriers is a preferable option to a merger. The analysis is extended to suggest alliances as a possible policy option on the deregulated airline markets. [JEL Classification: L20, L93]

Transportation Safety and the Allocation of Safety Improvements

12th AIAA Aviation Technology, Integration, and Operations (ATIO) Conference and 14th AIAA/ISSMO Multidisciplinary Analysis and Optimization Conference, 2012

How Firms Absorb Demand Side Shocks: Evidence from a Natural Experiment

SSRN Electronic Journal, 2000

We analyze impact of the freeway interchange collapse in San Francisco Bay area on difference in ... more We analyze impact of the freeway interchange collapse in San Francisco Bay area on difference in airfare quotes for travel into the area's three main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares ...

Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats... more Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily

SSRN Electronic Journal, 2000

The paper investigates the construction of a low cost airline network by analyzing JetBlue Airway... more The paper investigates the construction of a low cost airline network by analyzing JetBlue Airways' entry decisions into nonstop domestic U.S. airport-pair markets between 2000 and 2009.

Value of a Platform to a Seller: Case of American Airlines and Online Travel Agencies

SSRN Electronic Journal, 2000

ABSTRACT We approach the issue of the value of a platform to a seller in a two-sided market where... more ABSTRACT We approach the issue of the value of a platform to a seller in a two-sided market where both buyers and sellers multi-home. A seller that loses access to a major buyer platform can potentially incur substantial financial losses. We exploit a recent conflict between American Airlines and two leading online travel agencies (Expedia and Orbitz), which dropped American Airlines fare quotes during the first quarter of 2011. We present a simple model of airline ticket distribution. This model provides a framework to analyze the events that happened in the American Airlines – online travel agency conflict. We analyze price data for the first quarter of 2010 and 2011, employing a simple difference-in-differences identification strategy to evaluate changes in American Airlines’ fares. After controlling for across-market heterogeneity, carrier-specific time-invariant effects, and time-specific carrier-invariant effects, American Airlines’ fares during the conflict were 2.7-4.2 percent lower than similar fares charged by American’s main competitors (United, Continental, Delta, and US Airways). The fare effect is most pronounced in the sub-sample of one-stop itineraries, where competition is stronger, and customers are more likely to have to rely on travel agents – rather than carriers’ own web-sites – for flight bookings. In sum, our findings indicate that access to major buyer platforms is considerably valuable to a seller. We estimate that during the first quarter of 2011 the loss of access to the Expedia/Orbitz platforms resulted in over $50 million reduction in revenue for American Airlines.

Relationship between Fleet Characteristics and Welfare of Stakeholders of Commercial Air Transportation: Airlines, Manufacturers, and the Public

52nd Aerospace Sciences Meeting, 2014

Buyer Subsidies in Two-Sided Markets: Evidence from Online Travel Agents

Advances in Airline Economics, 2014

ABSTRACT Platforms in two-sided markets are known to provide subsidies to either buyers or seller... more ABSTRACT Platforms in two-sided markets are known to provide subsidies to either buyers or sellers, in order to take advantage of cross-group externalities inherent in such industries. Online travel agents can be thought of as platforms facilitating trade between passengers and travel service providers (airlines). This paper evaluates the effects of a buyer subsidy provided by one major online travel agent – a low-price guarantee offered by Orbitz. We find evidence consistent with increased airline participation with this travel agent upon implementation of the low-price guarantee policy. Our results confirm the theoretical claims that most-favored customer low price guarantee policies are pro-competitive.

IMF Loans and Moral Hazard

Review of Economics and Statistics, 2013

Tourism Management, 2015

Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats... more Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 -June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.

UKRAINIAN AIRLINE COMPANIES IN THE GLOBAL ECONOMY

Essays on competition and consolidation on international airline markets

Intentionally Higher Substitutability and Firms’ Profit: Case of Frequent Flier Program Partnerships

Quality Coordination in a Model of Vertical Integration

Market Power of Airports: A Case Study for Amsterdam Airport Schiphol

This study provides the first evidence on the impact of airline delays on urban employment. While... more This study provides the first evidence on the impact of airline delays on urban employment. While previous works have suggested that road congestion can slow down regional development, the impact of airline delays on metro-level jobs has not been thoroughly examined. The present study uses a 9-year panel of quarterly data, covering metropolitan-area-level observations for U.S. airports that service commercial passenger traffic. Data for total and industry-specific employment, as well as various measures of air traffic delays, are used. Our empirical estimates of the effects of air traffic on total employment are comparable to previously reported measures in the literature. However, we find that service-sector employment is less sensitive to air traffic than other studies suggested. We provide new evidence confirming that delays have a negative impact on employment, a finding that is robust to various specifications of our empirical model. Our results indicate that a 10 percent increase in the number of delayed flights leads to about a 0.2 percent decrease in total and service-sector employment, a 0.7 percent decline in leisure and hospitality employment, and a 1.1 percent reduction in the employment level of goods-producing jobs.

Are airports engines of economic development? A dynamic panel data approach

Urban Studies, 2015

Chapter 4 A Guide to Booking Airline Tickets Online

Advances in Airline Economics, 2012

Introduction to special issue “Pricing and regulation in the airline industry”

Research in Transportation Economics, 2014

SSRN Electronic Journal, 2000

This paper uses example of Ukraine to explore the issue of national airlines' strategies on the g... more This paper uses example of Ukraine to explore the issue of national airlines' strategies on the global deregulated airline market. Ukraine's case is unusual in a sense that the country currently has two main national carriers, which do not directly compete on any international route. The carriers' success on the global deregulated market requires a well-established and structured network, which none of the two carriers can offer at this time. We suggest that an alliance between the two carriers is a preferable option to a merger. The analysis is extended to suggest alliances as a possible policy option on the deregulated airline markets. [JEL Classification: L20, L93]

Transportation Safety and the Allocation of Safety Improvements

12th AIAA Aviation Technology, Integration, and Operations (ATIO) Conference and 14th AIAA/ISSMO Multidisciplinary Analysis and Optimization Conference, 2012

How Firms Absorb Demand Side Shocks: Evidence from a Natural Experiment

SSRN Electronic Journal, 2000

We analyze impact of the freeway interchange collapse in San Francisco Bay area on difference in ... more We analyze impact of the freeway interchange collapse in San Francisco Bay area on difference in airfare quotes for travel into the area's three main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares ...

Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats... more Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily

SSRN Electronic Journal, 2000

The paper investigates the construction of a low cost airline network by analyzing JetBlue Airway... more The paper investigates the construction of a low cost airline network by analyzing JetBlue Airways' entry decisions into nonstop domestic U.S. airport-pair markets between 2000 and 2009.

Value of a Platform to a Seller: Case of American Airlines and Online Travel Agencies

SSRN Electronic Journal, 2000

ABSTRACT We approach the issue of the value of a platform to a seller in a two-sided market where... more ABSTRACT We approach the issue of the value of a platform to a seller in a two-sided market where both buyers and sellers multi-home. A seller that loses access to a major buyer platform can potentially incur substantial financial losses. We exploit a recent conflict between American Airlines and two leading online travel agencies (Expedia and Orbitz), which dropped American Airlines fare quotes during the first quarter of 2011. We present a simple model of airline ticket distribution. This model provides a framework to analyze the events that happened in the American Airlines – online travel agency conflict. We analyze price data for the first quarter of 2010 and 2011, employing a simple difference-in-differences identification strategy to evaluate changes in American Airlines’ fares. After controlling for across-market heterogeneity, carrier-specific time-invariant effects, and time-specific carrier-invariant effects, American Airlines’ fares during the conflict were 2.7-4.2 percent lower than similar fares charged by American’s main competitors (United, Continental, Delta, and US Airways). The fare effect is most pronounced in the sub-sample of one-stop itineraries, where competition is stronger, and customers are more likely to have to rely on travel agents – rather than carriers’ own web-sites – for flight bookings. In sum, our findings indicate that access to major buyer platforms is considerably valuable to a seller. We estimate that during the first quarter of 2011 the loss of access to the Expedia/Orbitz platforms resulted in over $50 million reduction in revenue for American Airlines.

Relationship between Fleet Characteristics and Welfare of Stakeholders of Commercial Air Transportation: Airlines, Manufacturers, and the Public

52nd Aerospace Sciences Meeting, 2014

Buyer Subsidies in Two-Sided Markets: Evidence from Online Travel Agents

Advances in Airline Economics, 2014

ABSTRACT Platforms in two-sided markets are known to provide subsidies to either buyers or seller... more ABSTRACT Platforms in two-sided markets are known to provide subsidies to either buyers or sellers, in order to take advantage of cross-group externalities inherent in such industries. Online travel agents can be thought of as platforms facilitating trade between passengers and travel service providers (airlines). This paper evaluates the effects of a buyer subsidy provided by one major online travel agent – a low-price guarantee offered by Orbitz. We find evidence consistent with increased airline participation with this travel agent upon implementation of the low-price guarantee policy. Our results confirm the theoretical claims that most-favored customer low price guarantee policies are pro-competitive.

IMF Loans and Moral Hazard

Review of Economics and Statistics, 2013

Tourism Management, 2015

Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats... more Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 -June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.

UKRAINIAN AIRLINE COMPANIES IN THE GLOBAL ECONOMY

Essays on competition and consolidation on international airline markets

Intentionally Higher Substitutability and Firms’ Profit: Case of Frequent Flier Program Partnerships

Quality Coordination in a Model of Vertical Integration

Market Power of Airports: A Case Study for Amsterdam Airport Schiphol

This study provides the first evidence on the impact of airline delays on urban employment. While... more This study provides the first evidence on the impact of airline delays on urban employment. While previous works have suggested that road congestion can slow down regional development, the impact of airline delays on metro-level jobs has not been thoroughly examined. The present study uses a 9-year panel of quarterly data, covering metropolitan-area-level observations for U.S. airports that service commercial passenger traffic. Data for total and industry-specific employment, as well as various measures of air traffic delays, are used. Our empirical estimates of the effects of air traffic on total employment are comparable to previously reported measures in the literature. However, we find that service-sector employment is less sensitive to air traffic than other studies suggested. We provide new evidence confirming that delays have a negative impact on employment, a finding that is robust to various specifications of our empirical model. Our results indicate that a 10 percent increase in the number of delayed flights leads to about a 0.2 percent decrease in total and service-sector employment, a 0.7 percent decline in leisure and hospitality employment, and a 1.1 percent reduction in the employment level of goods-producing jobs.