Factors affecting aeronautical charges at major US airports

• We examine factors affecting airport aeronautical charges using US panel dataset.
• Evidence of cross-subsidization from non-aeronautical source to aeronautical charge.
• Costs strongly correlate to airport charges.
• Aeronautical charges are higher for hub and higher international traffic airports.
• Different types of governance structure do not seem to influence aeronautical charges.

This paper investigates the factors affecting airport aeronautical charges i.e. landing fee and passenger fee using a panel dataset covering 59 United States airports from 2002 to 2010. The findings reveal strong evidence of cross-subsidization from non-aeronautical revenue to aeronautical charges. In addition, unit cost strongly correlates to airport charges and aeronautical fees are more expensive for hub airports and airports with higher international traffic. While the aeronautical fees for Southwest airports are cheaper, it is not evident for airports dominated by low cost carries in general. Finally, there is a substitution effect in the price setting of landing charges and terminal charges: a higher landing charge leads to lower terminal charge and vice versa.