Estimating the impact of airport privatization on airline demand: A regression-based event study

• We model of passenger demand for routes of airports subject to either imminent or recent privatization.
• We investigate whether the privatization process produces a sequential impact over traffic.
• We examine recent Brazilian airport privatization experience as a case.
• Market penetration of a fast-growing low cost carrier is a probable cause of the highest estimated airport demand effect.

This paper develops an empirical model of passenger demand for routes of airports subject to either imminent or recent privatization. We investigate whether the privatization process produces a sequential impact over traffic. By employing a regression-based event methodology and controlling for fixed effects, price endogeneity and sample selection, we perform an econometric analysis of pre-privatization and post-privatization dynamic patterns of demand to infer the demand consequences of the major change in airport governance. We examine recent Brazilian airport privatization experience as a case. The main results suggest that privatization produced an overall increase in airline demand and that the airport notably recognized with the greatest demand potential and with the largest market penetration of a fast-growing low cost newcomer had the highest estimated ceteris paribus effect of privatization on demand.