This paper studies the relationship between demand uncertainty—the key source of excess capacity—and capacity utilization in the U.S. airline industry. We present a simple theoretical model that predicts that lower demand realizations are associated with higher demand volatility. This...

This paper studies the relationship between demand uncertainty — the key source of excess capacity — and capacity utilization in the U.S. airline industry. We present a simple theoretical model that predicts that lower demand realizations are associated with higher demand volatility. This...