Do Carriers Internalize Congestion Costs? Empirical Evidence on the Internalization Question

Economists have long suggested overhauling the existing U.S. airport landing/departure fees to reflect market valuations of scarce runway capacity. Economists, however, do not agree on the optimal congestion-based pricing scheme. While some researchers advocate for a uniform congestion fee regardless of a carrier’s airport market share, others suggest that airport tolls only reflect the congestion costs imposed on other carriers. This paper uses ten years of ontime performance data to empirically determine if carriers internalize congestion costs. We find that the answer to the internalization question depends upon the flight delay measure used since highly concentrated airports have shorter excess travel times, while the converse holds for departure and arrival delays