The Puzzle of Aircraft Size and Traffic Growth

This paper studies airlines' choices of flight frequency and aircraft size when passenger demand grows over time. The analysis shows that, when there are economies of operating larger aircraft, airlines would increase the number of flights, but not necessarily increase aircraft size to accommodate traffic growth. On the other hand, when there are no economies of operating larger aircraft, airlines would prefer operating larger aircraft to increasing the number of flights. The effect is stronger if the economies of aircraft size are more significant. These results hold whether airport charges are weight-based or flight-based, and are set exogenously or endogenously.