what is the price elasticity of supply for the airline industry?

Answer 1

Price elasticity is the consumption pattern change due to a change in price. Thus, price elasticity refers to the "demand side". Supply-side only reacts to the demand side's change. Airlines have historically tried to balance their passenger load factors (i.e. keep their planes the same "fullness"). This means if demand (Revenue-Tonne-Kilometers) rises by 1%, supply (Available-Tonne-Kilometer) rises by 1%.

Economy class, which tends to be leisure travellers, is more price elastic than the front of the plane. The front of the plane is highly price inelastic. This is why prices can go up more than 50% during good times, especially when load factors approach 80%. As a whole, revenues are about 50/50% driven by front/back of the plane. In total, price inelasticity of the front of the plane is greater than the back of the plane. Thus, price inelasticity is, in total, less than 1.0.

You can see this empirically by analyzing yields (revenues/RTK), which tend to rise during good times and fall during bad times (i.e. airlines jack up business/first class tickets during good economic times).