  The modernization of an airline's fleet can reduce its operating costs,
improve the perceived quality of service offered to passengers, and mitigate
emissions. The present paper investigates the market incentives that airlines
have to adopt technological innovation from manufacturers by acquiring new
generation aircraft. We develop an econometric model of fleet modernization in
the Brazilian commercial aviation over two decades. We examine the hypothesis
of an inverted-U relationship between market concentration and fleet
modernization and find evidence that both the extremes of competition and
concentration may inhibit innovation adoption by carriers. We find limited
evidence associating either hubbing activity or low-cost carriers with the more
intense introduction of new types of aircraft models and variants in the
industry. Finally, our results suggest that energy cost rises may provoke
boosts in fleet modernization in the long term, with carriers possibly
targeting more eco-efficient operations up to two years after an upsurge in
fuel price.
