The competitive impact of air crashes: Stock market evidence

We examine stock market reactions to commercial air crashes to test the hyp othesis that consumers respond by switching to rival airlines and/or flying less; We focus on the stock price reactions of airlines not involved in th e crash. If switching occurs, noncrash airlines should benefit to the exten t that they are direct competitors of the crash airline. We develop a measu re of market overlap and regress individual non-crash-airline abnormal retu rns on this measure, allowing the constant term to capture any negative spi llovers. The evidence supports both a switching effect and a spillover.