Understanding Low-Cost Airline Users' Expenditure Patterns and Volume

Abstract

The expansion of low-cost airlines (LCAs) has led to a reduction of flight costs and has enabled tourists to redistribute their trip budget and spend a higher proportion at the destination. Analyses of absolute trip spending by parts (such as transportation) and of trip budget share (for example, the proportion of transportation within the total trip budget) serve different objectives. The first type of analysis refers to how much tourists spend and the second to how they spend. The aims of this article are, first, to provide a new methodological tool to combine the analysis of budget share and absolute expenditure and, second, to analyse the determinants of absolute expenditure on transportation and the relative importance of transportation expenditure compared to other trip budget components. The main findings are that traveller characteristics affecting high absolute transportation expenditure are different from those affecting a high share of transportation in the trip budget. This has implications for LCA pricing strategies.