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Paulos Ashebir Lakew

Research

Peer-Reviewed Journal Publications

Abstract: This study uses aggregated data on concentration, delays, and airfares from the US airports to shed light on two issues. First, we examine the concentration-delays relationship to contribute to the airport-congestion self-internalisation debate. Our study is the first investigation of this issue that uses data on sources of delays. Second, we evaluate whether increases in flight delays result in lower airfares when travelling from an airport. Our empirical results are mixed: while total delays are positively correlated with airport-level concentration (contradicting the self-internalisation hypothesis), the variance of delays at large and medium hub airports does fall as concentration increases. We also find that an increase in airport concentration consistently decreases the share of delays that can be deemed endogenous to the airline. The negative relationship between delays and prices is confirmed, and estimates of this effect are similar to those found in the relevant literature. Of the various sources of delay, weather and late aircraft have the strongest negative impact on prices.

Abstract: This study provides the first empirical assessment of the impact airline delays have on urban employment. While previous works have suggested that road congestion can slow down regional development, the influence of air traffic delays on metro-level jobs has not been examined comprehensively. The present study uses a 9-year panel of quarterly data, which covers passenger airline traffic and delays at airports across urban areas in the United States. The panel also includes data on total and industry-specific employment at the metropolitan-area level. Our empirical estimates of the impact 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 effect 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 up to a 0.15 percent decrease in total and service-sector employment, a 0.47 percent decline in leisure and hospitality employment, and a 0.7 percent reduction in the employment level of goods-producing jobs.

Abstract: While controlling for the unique and unobserved characteristics of cities, this paper assesses the impact of urban size, employment, and income on air traffic. Previous studies have established links between the socioeconomic characteristics of cities and the volume of passenger and cargo traffic enplaned at their airports. Using the variations of population, employment, and income across urban areas, researchers have found that passenger enplanements have been proportional to city size and that they have increased with income and service sector employment. However, most earlier work relied on cross-section methods that ignored city-specific differences that may have influenced the drivers of air traffic. This paper is based on a 10-year quarterly panel of city-level economic and traffic measures, from which a city fixed-effects model is estimated. Thus, the results presented here shed light on the within-city effects that population, employment composition, and the average wage have on traffic and provide new insights into the determinants of air travel and goods movement. Controlling for the unobserved features of a metropolitan area, the paper confirms that passenger and cargo enplanements are proportional to population. Service sector employment and higher wages, indicating white-collar jobs, continue to induce both passenger and cargo transport, while a city's share of employment in manufacturing (blue-collar) jobs mostly affects cargo traffic. Furthermore, the fixed-effects results show that passenger enplanements exhibit more sensitivity to the proportion of urban workers providing nontradable services than to the share of workers in tradable service jobs.

Abstract: Studies on the economic impacts of air cargo traffic have been gaining traction in recent years. The slowed growth of air cargo traffic at California's airports, however, has raised pressing questions about the determinants of air cargo traffic. Specifically, it would be useful to know how California's air cargo traffic is affected by urban economic characteristics. Accordingly, this study estimates the socioeconomic determinants of air cargo traffic across cities in California. We construct a 7-year panel (2003-2009) using quarterly employment, wage, population, and traffic data for metro areas in the state. Our results reveal that the concentrations of both service and manufacturing employment impact the volume of outbound air cargo. Total air cargo traffic is found to grow faster than population, while the corresponding domestic traffic grows less than proportionally to city size. Wages play a significant role in determining both total and domestic air cargo movement. We provide point estimates for traffic diversion between cities, showing that 80 percent of air cargo traffic is diverted away from a small city located within 100 miles of a large one. Using socioeconomic and demographic forecasts prepared for California's Department of Transportation, we also forecast metro-level total and domestic air cargo tonnage for the years 2010-2040. Our forecasts for this period indicate that California's total (domestic) air cargo traffic will increase at an average rate of 5.9 percent (4.4 percent) per year.

Abstract: This paper examines the cost structures of the leading integrated air cargo carriers, FedEx Express and UPS Airlines. A total cost model is estimated for the two carriers using quarterly data on domestic operations and costs over a nine-year period (2003-2011). The estimated model indicates that the integrated industry exhibits increasing returns to traffic density and constant returns to scale. Accounting for carrier-specific differences in cost structure and network size, FedEx Express is found to be more cost-efficient than UPS Airlines. Looking at the carriers individually, UPS Airlines exhibits substantial economies of traffic density and constant returns to scale while FedEx Express' cost structure is characterized by weak economies of density and constant returns to scale. The combined effect of returns to density and returns to scale on the cost structures of integrated carriers is captured by economies of size. Both FedEx Express and UPS Airlines exhibit economies of size, indicating that carriers in the integrated industry can be more cost efficient by making appropriate adjustments to their network size as their output grows. Moreover, the relative cost-efficiencies of the carriers are reversed when their network-size differences are not controlled.

Abstract: A firm can obtain market power through its dominant position on the product market, or via control of a key resource. In particular, it has been argued that airport dominance is a more important source of market power in the US airline industry than route dominance. We examine this contention by analyzing a seventeen-year panel of airport-level prices in the United States. We demonstrate that even though on average airport-level concentration appears to be the strongest source of market power, concentration on routes originating at an airport is the strongest predictor of price levels for the sub-set of large and medium hub airports. There is little evidence that either airport or route dominance significantly affect prices in the sub-sample of medium and small hub airports. There is also little evidence that an airport's dominant carrier exerts market power beyond the level predicted by the airport or route dominance. Our results imply that consumer welfare losses due to airline consolidation can be concentrated in smaller communities, and related to changes in airport-level concentration. We provide a simple evaluation of the possible effects of two recent and one projected mergers (Delta-Northwest, United-Continental, and American-US Airways) in light of this finding, and suggest that the former consolidation event can potentially lead to non-trivial consumer welfare losses to travelers in over 30 small communities.