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Impact of low-cost carrier exit on tourism revenues

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  • He, Yulu
  • Wu, Hanjun
  • Tsui, Kan Wai Hong
  • Wang, Kun
  • Fu, Xiaowen

Abstract

A low-cost carrier withdrawal triggers the airline substitution effect as remaining full-service carriers raise fares, reducing tourism revenues. Meanwhile, a transport mode shift to ground transportation may boost local spending and generate additional regional tourism revenues. This study uses a unique difference-in-differences framework to assess the net impact of low-cost carrier withdrawal from New Zealand's regional markets. Findings reveal the “airline substitution effect” outweighs the “transport mode shift”, causing a net tourism revenue drop after a low-cost carrier exit. Policy implications suggest prioritising low-cost carrier retention through targeted subsidies and support to enhance regional tourism and economic growth.

Suggested Citation

  • He, Yulu & Wu, Hanjun & Tsui, Kan Wai Hong & Wang, Kun & Fu, Xiaowen, 2026. "Impact of low-cost carrier exit on tourism revenues," Annals of Tourism Research, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:anture:v:116:y:2026:i:c:s016073832500177x
    DOI: 10.1016/j.annals.2025.104071
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