TY - JOUR
T1 - Government interventions in regional airline markets based on aircraft size—Welfare and environmental implications
AU - Chen, Yilin
AU - Hou, Meng
AU - Wang, Kun
AU - Yang, Hangjun
N1 - Funding Information:
We would like to thank two anonymous referees and seminar participants at the 2022 ATRS Conference in Antwerp. Supported by the National Social Science Foundation of China ( 18ZDA071 ), the National Natural Science Foundation of China (71901065), and “the Fundamental Research Funds for the Central Universities” in UIBE ( CXTD13-03 ).
Publisher Copyright:
© 2023 Elsevier Ltd
PY - 2023/3
Y1 - 2023/3
N2 - Airlines can deploy small-sized regional aircraft or narrow-bodied aircraft (with more seats) to fly regional airline routes. Although narrow-bodied aircraft is more emission-efficient on a per-seat basis, the load factor of narrow-bodied aircraft could be lower due to less traffic on regional routes. Thus, small-sized regional aircraft could emit less on a per-flight or per-passenger basis. This study establishes an integrated economic model to examine how government interventions on aircraft size in the regional markets can affect both social welfare and carbon emissions. Two real policies adopted in China to promote the use of small-sized regional aircraft are analyzed and benchmarked, namely the tax exemption and direct subsidies for airlines deploying small-sized regional aircraft. Our theoretical findings suggest that, when compared to the benchmark case with no policy, the tax exemption can bring higher social welfare, but also more total emissions. Compared to the tax exemption policy, the subsidy policy may result in both higher social welfare and fewer emissions. However, a welfare-maximizing level of the subsidy might lead to more emissions than the tax exemption policy or the case without any policy. Both policies would reduce government tax revenues that could be used to improve other aspects of the aviation sector. When this cost of public funds is taken into account, the tax exemption policy is further unfavored. There exist certain levels of subsidies that would lead to no-worse social welfare than the case of no policy, while it becomes more difficult for the subsidy policy to help reduce total emissions.
AB - Airlines can deploy small-sized regional aircraft or narrow-bodied aircraft (with more seats) to fly regional airline routes. Although narrow-bodied aircraft is more emission-efficient on a per-seat basis, the load factor of narrow-bodied aircraft could be lower due to less traffic on regional routes. Thus, small-sized regional aircraft could emit less on a per-flight or per-passenger basis. This study establishes an integrated economic model to examine how government interventions on aircraft size in the regional markets can affect both social welfare and carbon emissions. Two real policies adopted in China to promote the use of small-sized regional aircraft are analyzed and benchmarked, namely the tax exemption and direct subsidies for airlines deploying small-sized regional aircraft. Our theoretical findings suggest that, when compared to the benchmark case with no policy, the tax exemption can bring higher social welfare, but also more total emissions. Compared to the tax exemption policy, the subsidy policy may result in both higher social welfare and fewer emissions. However, a welfare-maximizing level of the subsidy might lead to more emissions than the tax exemption policy or the case without any policy. Both policies would reduce government tax revenues that could be used to improve other aspects of the aviation sector. When this cost of public funds is taken into account, the tax exemption policy is further unfavored. There exist certain levels of subsidies that would lead to no-worse social welfare than the case of no policy, while it becomes more difficult for the subsidy policy to help reduce total emissions.
KW - Aircraft size
KW - Carbon emission
KW - Regional airline market
KW - Subsidy
KW - Tax exemption
UR - http://www.scopus.com/inward/record.url?scp=85147088965&partnerID=8YFLogxK
U2 - 10.1016/j.tra.2023.103593
DO - 10.1016/j.tra.2023.103593
M3 - Journal article
AN - SCOPUS:85147088965
SN - 0965-8564
VL - 169
JO - Transportation Research Part A: Policy and Practice
JF - Transportation Research Part A: Policy and Practice
M1 - 103593
ER -