The impact of low cost carriers on non-aeronautical revenues in airport: An empirical study of UK airports

Abstract

The purpose of this study is to clarify the impact of low cost carriers (LCCs) on non-aeronautical revenues in 26 UK airports from 1999 to 2008. Increasingly non-aeronautical revenues have become an important source for airport revenue. Our literature review highlights that there is little consensus in empirical results concerning LCC impact on non-aeronautical revenues, some of these report positive impact while others show negative impact. We estimate a non-aeronautical revenue function which includes frequency share of LCC, Air Transport Movements (ATMs), number of passengers and population of hinterland of each observed airports as explanatory variables. In addition to this, we produce marginal revenue estimates for both the case of capacity constrained and capacity unconstrained circumstance in airports. As a result, in the case of a non-capacity constrained airport, on average, the marginal revenue of an additional LCC ATM is £147 while for non-LCC ATM it is £226. On the other hand, in the case of a capacity constrained airport, on average, substituting one non-LCC ATM with an LCC ATM reduces revenue by £79.

Impact of Non-Aeronautical Revenues on Airport Landing Charge in Global Airports

“…Zhang and Zhang ( 20 ) investigated the optimal pricing between NAR in concession and aviation profit-making activities, and since then, the importance of NAR has been further emphasized at international airports. Many previous studies have also suggested that NAR has further increased in importance to the airport industry ( 3 , 21–23 ). Graham ( 24 ) investigated the importance of NAR for today’s airports.…”

“…The critical point of this discussion is how airport management can maximize an airport’s competitiveness by enabling various revenue sources. This leads each airport management to consider the effects of introducing various policies that increase aeronautical and non-aeronautical revenue ( 3 ).…”

Decision model innovation for competitive productivity (CP) in the airport industry

“…activities not directly resulting through the operation of aircraft. This encompasses revenues from commercial activities within the terminals such as food and beverage, retail, car parking and rents for terminal space and airport land (Graham, 2009;Yokomi et al, 2017).…”

Aircraft-Related Charges in European Airports: Determinants and Differentiation

“…Together with non-aeronautical revenue it makes up total operating revenue of the airport. In general, the issues of non-aeronautical revenue get more coverage in research in terms of their determinants (Fasone, Kofler, and Scuderi, 2016) , share and structure development over time (Graham, 2009) as well as strategies used to increase it (Puls and Lentz, 2018), especially with the expansion of low cost carriers (Yokomi, Wheat, and Mizutani, 2017). At the same time, less attention is paid in research to aeronautical revenue which is often taken for granted as it is sometimes wrongly believed to only reflect the underlying cost basis.…”