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

Author

Listed:
  • 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.

Suggested Citation

  • Gary M. Fournier & Monica E. Hartmann & Thomas Zuehlke, 2005. "Airport Substitution by Travelers: Why do we have to drive to fly?," Working Papers wp2005_09_01, Department of Economics, Florida State University.
    • Handle: RePEc:fsu:wpaper:wp2005_09_01
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    File URL: https://coss.fsu.edu/econpapers/wpaper/wp2005_09_01.pdf
    File Function: First version, 2005-03
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    Citations

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    Cited by:

    1. Hirsch, Barry, 2006. "Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints," IZA Discussion Papers 2384, Institute of Labor Economics (IZA).
    2. 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.
    3. Wittman, Michael D., 2014. "Public funding of airport incentives in the United States: The efficacy of the Small Community Air Service Development Grant program," Transport Policy, Elsevier, vol. 35(C), pages 220-228.
    4. 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.
    5. Miller, Benjamin I. & Dewey, James F. & Denslow, David & Miller, Edward B., 2016. "A welfare analysis of subsidies for airports," Journal of Air Transport Management, Elsevier, vol. 50(C), pages 83-90.

    More about this item

    Keywords

    airline economics; airport substitution; spatial competition;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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