Impact of low-cost carrier exit on tourism revenues

Article

He, Y. L., Wu, H. J., Tsui, W. H. K., Wang, K., & Fu, X.. 2026. "Impact of low-cost carrier exit on tourism revenues." Annals of Tourism Research. 116. https://doi.org/10.1016/j.annals.2025.104071
Article Title

Impact of low-cost carrier exit on tourism revenues

ERA Journal ID19645
Article CategoryArticle
AuthorsHe, Y. L., Wu, H. J., Tsui, W. H. K., Wang, K., & Fu, X.
EditorsAndreas Papatheodorou
Journal TitleAnnals of Tourism Research
Journal Citation116
Article Number104071
Year2026
PublisherElsevier
ISSN0160-7383
1873-7722
Digital Object Identifier (DOI)https://doi.org/10.1016/j.annals.2025.104071
Abstract

A low-cost carrier withdrawal triggers the airline substitution effect as remaining full-service carriers raise fares, reducing tourism revenues. Meanwhile, a transport mode shift to ground transportation may boost local spending and generate additional regional tourism revenues. This study uses a unique difference-in-differences framework to assess the net impact of low-cost carrier withdrawal from New Zealand's regional markets. Findings reveal the “airline substitution effect” outweighs the “transport mode shift”, causing a net tourism revenue drop after a low-cost carrier exit. Policy implications suggest prioritising low-cost carrier retention through targeted subsidies and support to enhance regional tourism and economic growth.

KeywordsDomestic tourism revenues; Low-cost carrier withdrawal; Difference-in-differences; Airline substitution effect; Transport mode change effect
ANZSRC Field of Research 2020350901. Air transportation and freight services
Byline AffiliationsSchool of Business
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