Long-Distance Airport Substitution and Air Market Leakage: Empirical Investigations in the U.S. Midwest

Abstract

Following airline mergers and network reorganizations aimed at reducing operational costs, consolidated air services at large hub airports have encouraged air travelers to forego use of their smaller local airports to access large hub airports offering superior air services farther away. This study investigates airport leakage in areas of Wisconsin and Michigan served by small airports, where air travelers may leak to neighboring large hubs. Using a proximity-based service area definition, three airports experiencing leakage are identified, and a hierarchical logit airport choice model is applied that accounts for air service characteristics and access distance for travelers coming from these airports’ service areas. Results show that a similar mean number of flight legs at both the local and substitute (large hub) airports will encourage leakage at Dane County Regional and Gerald R. Ford International airports, indicating that adding direct flights alone will not be sufficient to combat leakage. Comparable access distances to local and substitute airports have opposite effects on the local markets of Gerald R. Ford International and Milwaukee Mitchell International airports—promoting leakage at the former but discouraging it at the latter. Furthermore, proportional increases in airfares at local airports lead to uneven losses of markets in investigated service areas. Overall, the study provides empirical evidence of long-distance airport leakage in parts of the U.S. Midwest, and how its implications can be used by small airports seeking to further understand and respond to travelers’ airport choices within their local markets.