Prices of Tickets in the U.S. Airline Industry: An Analysis of the Effect of the Oil Price on the Price of Airline Tickets Between 1993 and 2014

This research focuses on the effect of the oil price on the price of airline tickets. In this study two hypotheses are tested to estimate two different effects. Panel data on ticket prices from 1993 to 2014 on 24 routes with varying levels of competition is collected to estimate the effects. A pooled Ordinary Least Squares regression model is run on the 50th percentile of prices of airline tickets to test the first effect. Evidence is provided that a change in the oil price does not result in a different effect in competitive and non-competitive routes. By running a Seemingly Unrelated Regression model, evidence is provided for the effect of the oil price to be stronger for the lower segment of ticket prices than for the higher segment of ticket prices on a route.