Airport and Airline Substitution Effects in Multi-Airport Markets

Abstract

Airline travel is composed of business and nonbusiness travelers, each with different preferences that give rise to differences in demand elasticities and substitution not only across airlines but also airports. In this study, we develop and estimate a model of airline wherein consumers choose which airports and airline to use that allows for unobserved differences between travelers (e.g., business and nonbusiness travelers). The results point to the role that airports themselves play in the ultimate selection of a flight, and that there are strong interactive effects between the airlines’ networks and the consumers’ preferences across airports.

Citation

Mahoney, D. and Wilson, W.W. (2014), "Airport and Airline Substitution Effects in Multi-Airport Markets", The Economics of International Airline Transport (Advances in Airline Economics, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 309-337. https://doi.org/10.1108/S2212-160920140000004011