LAUSR

Using data from 1995 to 2016, this study examines airline capacity growth in the U.S. domestic market, and its impact on revenue. The results show that, after controlling for the strength of the economy and the price of fuel: (1) decreases in total domestic airline capacity are strongly correlated with increases in average domestic revenue per available seat mile (RASM); and (2) decreases in total domestic airline capacity are strongly correlated with increases in total domestic revenue. The results also show that using the real GDP growth rate as the focal point for capacity growth may help airlines maintain or slightly increase RASM over time.