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

Gary Fournier (), Monica Hartmann () and Thomas Zuehlke

No wp2005_09_01, Working Papers from Department of Economics, Florida State University

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.

Keywords: airline economics; airport substitution; spatial competition (search for similar items in EconPapers)
JEL-codes: L93 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-09
New Economics Papers: this item is included in nep-com, nep-geo and nep-ure
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