The impact of airport fees on fares for the leisure air travel market: The case of Spain

Panel data is used to determine the incidence of airport fees on fares in the Spanish leisure market airlines. We also study its structure through an empirical specification of a pricing and demand equation system. The results show the existence of market power, strategic behavior and density economics. We also demonstrate that airlines pass all the airport fees onto customers by increasing fares. Furthermore, we find that the behavior of airlines in routes with the presence of low cost carriers do not differ from other routes.

Research highlights
► Panel data is used to determine the incidence of airport fees on fares in the Spanish leisure market airlines.
► The behavior of airlines in routes with the presence of low cost carriers do not differ from other routes.
► It is found that airlines pass all the airport fees onto customers by increasing fares.