Airport Substitution by Travelers: Why do we have to drive to fly?
AbstractThis paper explores aspects of the determination of airline faresin selected medium-sized U.S. markets subject to competition fromalternative airport hubs within driving distance. Passengers inthese markets often face substantial discounts at distantairports, in exchange for the time costs of driving there. Spatiallinkages in airport competition are not well studied. A panel of16 quarters is constructed in order to investigate models ofspatial error correlation and spatial autoregression in overallfare levels in adjacent airports. We find that fare differentialsbetween local and nearby alternative airports can lead to lowerload factors and other indicators of poor performance in smallerlocal airports. Fare differentials at nearby hub airports oftenprovide substantial incentives to travelers and are an importantdeterminant of poor performance at medium-sized airports.
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Bibliographic InfoPaper provided by Department of Economics, Florida State University in its series Working Papers with number wp2005_09_01.
Length: 29 pages
Date of creation: Sep 2005
Date of revision:
Find related papers by JEL classification:
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-01 (All new papers)
- NEP-COM-2006-04-01 (Industrial Competition)
- NEP-GEO-2006-04-01 (Economic Geography)
- NEP-URE-2006-04-01 (Urban & Real Estate Economics)
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- Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
- Daraban, Bogdan & Fournier, Gary M., 2008. "Incumbent responses to low-cost airline entry and exit: A spatial autoregressive panel data analysis," Research in Transportation Economics, Elsevier, vol. 24(1), pages 15-24.
- Hirsch, Barry, 2006. "Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints," IZA Discussion Papers 2384, Institute for the Study of Labor (IZA).
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