Which factors impact on the presence of incentives for route and traffic development? Econometric evidence from European airports

In order to attract air traffic, many airports offer discounts and rebates on standard charges through incentives for route and traffic development. In this paper, we employ a probit instrument variable approach to a sample of 194 European airports, so as to study the factors influencing the presence of such incentives. We find that airports decide simultaneously on the standard charges level and the introduction of incentives. Furthermore, airport ownership, regulation and competition, as well as potential passenger demand impact on their presence.