Coordinated Capacity Reductions and Public Communication in the Airline Industry

Abstract We investigate the allegation that legacy US airlines communicated via earnings calls to coordinate with other in offering fewer seats on competitive routes. To this end, we first use text analytics build a novel dataset communication among about their capacity choices. Estimates from our preferred specification show number of offered is 2$\%$ lower when all market discuss concept “capacity discipline.” verify reduction materializes only communicate concurrently, and it cannot be explained by possibilities, including are simply announcing investors unilateral plans reduce capacity, then following through those announcements.