Do Hub Airlines “Internalize” Congestion Delays?
Although most economists who have studied delays at congested airports recommend some form of pricing to bring peak demands into conformity with runway capacity, the past decade has seen several studies claiming that airlines with a dominant position at hubs (e.g., American at DFW or Delta at Atlanta) “internalize” the resulting delays-i.e., accept them as a cost of doing business at the hub (while appreciating that the congestion also deters new entrants from competing there during peak periods). The most cited of these studies was by Jan Brueckner in 2002, who ended up proposing that airport congestion prices should therefore be lower for the dominant hub carrier than for others. I only recently came across a 2005 paper by economists Katherine Harback and Joseph Daniel which provides a new empirical test of the internalization argument: “(When) Do Hub Airlines Internalize Their Self-Imposed Congestion Delays?” (University of Delaware Department of Economics, Working Paper No. 2005-08
