Low-Cost Carriers and Canadian Traffic Generation at US Border Airports

Abstract

An investigation is conducted of the contribution of low-cost carriers (LCCs) to traffic diversion from Canadian airports to nearby US airports. An estimated five million Canadian passengers divert to US airports each year. We find that LCCs contribute significantly to the diversion of traffic to US airports. Routes to/from US border airports have a 27 percentage points higher traffic account when an LCC operates on the route, compared to equivalent routes without an LCC presence. Canadian policymakers need to seek ways to attract LCCs to transborder routes to stem this costly traffic diversion.

Keywords: Airfares; Airport leakage; Low cost carriers; Open skies; U.S.-Canadian air passenger market

JEL Classification: L09, L93