Analysis of the Effects of Airport Incentive Schemes on Airline Supply and Passenger Demand Growth

As uncertainty increases within the aviation industry, the importance of airport sustainability has come to the forefront, necessitating continuous demand generation through strategic aviation marketing. Consequently, there is an urgent need to analyze the practical efficacy of the incentive programs implemented primarily by global airports. In particular, amid intense competition among Northeast Asian airports to attract airlines, this study empirically analyzes the effects of Incheon International Airport’s (ICN) incentive programs on airline supply and passenger demand growth. To this end, utilizing empirical data from ICN spanning 2016 to 2024, this research quantitatively establishes the causal mechanism between incentive programs, supply expansion, and demand growth. Specifically, it comprehensively evaluates the impact of incentives provided for new airline entry and new route expansion, while comparing the effects across different airline business models. The empirical results confirm that the effects vary significantly depending on the type of incentive program and the airline category. Furthermore, the findings indicate that airport incentives are not merely sunk costs, but rather strategic investments that generate measurable aviation demand and airport revenue. However, the analysis also suggests a need to supplement and refine these incentive schemes to tailor them to specific airline types.