Impacts of low cost carrier services on efficiency of the major U.S. airports

Abstract

While traditionally many LCCs use secondary airports because of the availability of slots, spare capacity and low aeronautical cost, in recent years more and more LCCs are shifting their operations to major airports. This has made necessary for some major hub airports to attempt to attract LCC business. Since it is not clear whether such a move would improve or harm efficiency of the hub airports, this paper investigates this issue using a panel data of 63 major U.S. airports for the 2007–2010 period. After controlling the effects of other airport characteristics on efficiency, we found non-monotonic relationships between the level of LCC presence and airport efficiency. Efficiency of airport decreases as LCC presence increases from very low level, reaches the lowest efficiency point, and then increases as LCC services become dominant. Our empirical findings suggest existence of economies of airport specialization in either FSCs or LCCs. The even mix between FSC and LCC services at an airport appears to be inefficient. This result is somewhat contradictory to the findings of recent studies on LCC effects on European airports.