Exploring passenger and flight characteristics' impacts on airport retail income: Evidence from Incheon International Airport

Abstract

This study examines passenger and flight characteristics' impacts on airport retail income using transaction data from Incheon Airport (ICN) duty-free. Two indicators, per-flight expenditure and buyer proportion, were introduced to measure the impacts on retail revenue. This study employed the female passenger ratio per flight and the domestic passenger ratio as passenger characteristics. Flight type (LCC or not), transit passenger proportion, and flight delay were introduced as flight characteristics. Unfavorable departure gates and disadvantageous terminal locations were presented as location characteristics. Based on the multiple regression model, this study analyzed the effect of each factor on airport retail revenue. The research findings provide managerial implications to airport operators. It is financially advantageous to avoid allocating flights with many female passengers to favorable departure gates for accessing retail shops. A high frequency of purchases of Korean passengers does not lead to a significant sales amount because of the regulations. Transit passengers are low-yield customers for airlines and airport operators. Flight delay increases the per-flight expenditure and the buyer percentage to a certain level, while excessive delays can reduce the purchase amount. Also, this study identified that the impact of assigning flights to disadvantageous locations varies depending on the type of flight based on the expansion model using an interaction term. The location has a significant influence on passenger shopping behavior. Since FSC passengers have a solid impulsive buying tendency, airport operators should avoid giving FSCs to unfavorable gates. Although ICN kept operation policies to assign LCC flights to a terminal disadvantageous for shopping, this study presents that the commercial revenue contribution of LCCs is not weaker than FSCs when controlled a terminal location. Therefore, it is necessary to reconsider assigning LCCs to a terminal unfavorable for shopping without evaluating purchasing power.