Turning adversity into opportunity: Market power, public policy, and financial market dynamics in times of war
研究了以色列战争作为局部冲击对全球航空业的影响，发现一项最后手段的保险担保计划虽无直接财政成本，却重塑了区域市场，使国内主导航空公司价值翻倍，但以竞争减少和票价上升为代价，且金融市场未能及时准确反映政策效果。
• We examine the war in Israel as a localized yet recurrent shock to the global airline industry. • A last resort, fiscally efficient insurance guarantee transformed the regional market entirely. • Leading domestic airline doubled in value, while foreign rivals suffered disproportionate losses. • Low-cost carriers demonstrated relative resilience, later delivering positive abnormal returns. • Financial markets failed to enforce discipline or offer policymakers accurate, timely insights. We examine the impact of the ongoing war in Israel as a localized, yet recurrent, shock to the global airline industry, focusing on a distinct case of minimal indirect government intervention. Our analysis shows that a last-resort insurance scheme, although avoiding direct net fiscal costs, reshaped the regional industry entirely by strengthening the leading privately-owned domestic carrier, which more than doubled in value and increased government tax revenues. However, these benefits came at a welfare cost through reduced competition and higher fares, alongside substantial disproportionate losses for foreign airlines exposed to Israel. Low-cost carriers proved more resilient, eventually generating positive abnormal returns. Financial markets initially misjudged the implications of the intervention, with a delayed recognition of its positive effects not occurring until several months later, thereby struggling to impose effective discipline on policy actions or offer policymakers timely and accurate insights. Overall, the findings highlight how limited interventions in response to localized shocks can alter competitive dynamics, fiscal outcomes, and market efficiency, providing broader policy lessons for governments and regulators.