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Airport Substitution by Travelers: Why do we have to drive to fly?

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Author Info

  • Gary M. Fournier

    ()
    (Florida State University)

  • Monica E. Hartmann

    ()
    (University of St. Thomas)

  • Thomas Zuehlke

    ()
    (Florida State Unversity)

Abstract

This 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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File URL: ftp://econpapers.fsu.edu/RePEc/fsu/wpaper/wp2005_09_01.pdf
File Function: First version, 2005-03
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Bibliographic Info

Paper provided by Department of Economics, Florida State University in its series Working Papers with number wp2005_09_01.

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Length: 29 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:fsu:wpaper:wp2005_09_01

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Related research

Keywords: airline economics; airport substitution; spatial competition;

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Cited by:
  1. 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.
  2. 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).
  3. 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.

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