Page 1 of 24

Impact of 9/11 on U.S. Airline Demand

Continues for 23 more pages »
Read full document

Impact of 9/11 on U.S. Airline Demand

  • By
  • June 19, 2013
  • 8424 Words
  • 5 Views
Page 1 of 24
Journal of Economics and Business 57 (2005) 75–95

Assessing the impact of the September 11 terrorist attacks on U.S. airline demand Harumi Itoa,1 , Darin Leeb,∗
a

Department of Economics, Box B, Brown University, Providence, Rhode Island 02912, USA b LECG, Corp. 350 Massachusetts Avenue, Suite 300, Cambridge, MA 02139, USA Received 3 July 2003; received in revised form 25 May 2004; accepted 8 June 2004

Abstract This paper assesses the impact of the September 11 terrorist attacks and its after-effects on U.S. airline demand. Using monthly time-series data from 1986 to 2003, we find that September 11 resulted in both a negative transitory shock of over 30% and an ongoing negative demand shock amounting to roughly 7.4% of pre-September 11 demand. This ongoing demand shock has yet to dissipate (as of November 2003) and cannot be explained by economic, seasonal, or other factors. © 2004 Elsevier Inc. All rights reserved. JEL classification: R41; L16; L93 Keywords: Airlines; Structural change; Attenuating shock; September 11

1. Introduction No industry has suffered greater economic damage from the terrorist attacks of September 11, 2001 than the U.S. airline industry. In addition to directly causing a temporary but complete shut-down of the commercial aviation system, the attacks caused many travelers to reduce or avoid air travel, weary of a newly-perceived risk associated with flying. Likewise, following September 11, many businesses put temporary freezes on all but the ∗ 1

Corresponding author. Tel.: +1 617 761 0108; fax: +1 617 621 8018. E-mail addresses: Harumi ito@brown.edu (H. Ito), darin lee@lecg.com (D. Lee). Tel.: +1 650 329 9743; fax: +1 401 863 1970.

0148-6195/$ – see front matter © 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.jeconbus.2004.06.003

76

H. Ito, D. Lee / Journal of Economics and Business 57 (2005) 75–95

most essential travel for their employees.1 And although the initial “panic” driven fear of flying...