Airline capacity setting after re-regulation: The Brazilian case in the early 2000s

The Brazilian airline industry is one of the few cases where there was temporary re-regulation of the market after years of economic liberalization. This was done on the basis of excess capacity and after systemic financial crises. Regulators reintroduced mechanisms for market intervention in 2003–2004, with airlines no longer allowed to expand frequencies and fleets at will. Additionally, a code-share agreement between the two biggest network carriers was encouraged to increase the overall profitability. This study looks at an extensive panel of routes to identify elements that affected the decisions Brazilian domestic scheduled passenger airlines made regarding capacity, the factor most affected by the re-regulation.