Airport consolidation and the provision of air services

•Should a city be served by multiple airports or by a single, consolidated airport?•Provision of air services depends on costs of operating and accessing the airport(s).•This paper estimates the effect of the number of airports on the air services that are provided.•Local air traffic is shown to be increasing in the number of airports, implying lower perflight costs.•Cities with multiple airports are more likely to be chosen as hubs.

Airport policy involves decisions about not only the sizes of airports but how many airports should serve a given area. I test the arguments for airport consolidation by estimating the effect of the number of airports on total local traffic using US data and a historical instrument for the number of airports. Cities that are randomly allocated a larger number of airports are found to host more air traffic and flights to more destinations. Furthermore, the effect is largely due to a greater number of transit passengers, so cities with multiple airports are more likely to be chosen as airline hubs.