The United States International Air Route Award Process: Shareholder Wealth Effects and Policy Implications |
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| Authors: | Pruitt Stephen W Hoffer George E Tse KS Maurice |
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| Institution: | (1) Department of Finance, Insurance, and Real Estate, Fogelman College of Business and Economics, University of Memphis, Memphis, TN, 38152;(2) Department of Economics, School of Business, Virginia Commonwealth University, Box 4000, Richmond, VA, 23284-4000;(3) University of Hong Kong, Hong Kong, Hong Kong |
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| Abstract: | This study empirically investigates the market pricing dynamics of United States airline stocks in response to United States government allocations of exclusive, zero-priced international air route awards from the 1963 to 1993 time period. A $900 filing fee required by the Department of Transportation represents the only explicit monetary cost associated with the award of an international air route. This low fee suggests that the current award system subsidizes United States airlines by transferring valuable public property rights to private ownership and control for paltry explicit fees. The performed dollar abnormal tests suggest that the 82 analyzed international air routes have enriched airline shareholders by about $3.5 billion. |
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