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Investigating the Dynamic Spillover Effects of Low-Cost Airlines on Airport Airfare Through Spatio-Temporal Regression Models

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Abstract

Low airfare is associated with low passengers’ transportation expense, high regional accessibility, and active related industry market. Low-cost airlines have been found to be effective on airfare reduction. However, most previous studies examined their impacts from the perspectives of certain routes and companies. This paper extends the literature by examining the impact of low-cost airlines from the perspective of airports. A spatio-temporal regression model is used to analyze the relationship between airport airfare and low-cost airlines’ market shares. The spatial consideration, which is also under-investigated in the air literature, creates a chance to analyze the spatial interaction of airfare among airports. Along with the temporal consideration, this analytic framework helps to quantitatively show the impact of low-cost airline over time and space by the dynamic spillover-effect function. A case study of market share improvement of AirTran Airway at Albany International Airport (ALB) is used to illustrate the dynamic spillover effect. Results show that the average airfare of ALB will drop $18.64 right after AirTran takes 10 % market share, continue to drop in the following years, and stabilize at around 10 years. Airfare at other airports will also drop, and the magnitudes decrease as time and distance to ALB increase.

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Authors and Affiliations

  1. Department of Civil and Environmental Engineering, Rensselaer Polytechnic Institute, 4032 JEC Building, 110 8th Street, Troy, NY, 12180-3590, USA

    Dapeng Zhang & Xiaokun Wang

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  1. Dapeng Zhang
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  2. Xiaokun Wang
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Correspondence to Xiaokun Wang.

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Zhang, D., Wang, X. Investigating the Dynamic Spillover Effects of Low-Cost Airlines on Airport Airfare Through Spatio-Temporal Regression Models. Netw Spat Econ 16, 821–836 (2016). https://doi.org/10.1007/s11067-015-9300-z

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  • DOI: https://doi.org/10.1007/s11067-015-9300-z

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