Can the European low-cost airline boom continue? Implications for regional airports

At a time when the traditional major airlines have struggled to remain viable, the low-cost carriers have become the major success story of the European airline industry. This paper looks behind the headlines to show that although low-cost airlines have achieved much, they too have potential weaknesses and face a number of challenges in the years ahead. The secondary and regional airports that have benefited from low-cost carrier expansion are shown to be vulnerable to future changes in airline economics, government policy and patterns of air service. An analysis of routes from London demonstrates that the low-cost airlines have been more successful in some markets than others. To attractive and historically under-served leisure destinations in Southern Europe they have stimulated dramatic growth and achieved a dominant position. To major hub cities however they typically remain marginal players and to secondary points in Northern Europe their traffic has been largely diverted from existing operators. There is also evidence that the UK market is becoming saturated and new low-cost services are poaching traffic from other low-cost routes. Passenger compensation legislation and possible environmental taxes will hit the low-cost airline industry disproportionately hard. The high elasticities of demand to price in certain markets that these airlines have exploited will operate in reverse. One of the major elements of the low-cost business model involves the use of smaller uncongested airports. These offer faster turn-arounds and lower airport charges. In many cases, local and regional government has been willing to subsidise expansion of air services to assist with economic development or tourism objectives. However, recent court cases against Ryanair now threaten these financial arrangements. The paper also examines the catchment areas for airports with low-cost service. It is shown that as well as stimulating local demand, much traffic is captured from larger markets nearby through the differential in fare levels. This has implications for surface transport, as access to these regional airports often involves long journeys by private car. Consideration is then given to the feasibility of low-cost airlines expanding into the long-haul market or to regional operations with small aircraft. Many of the cost advantages are more muted on intercontinental services.

The signalling effect of eco-labels in modern coastal tourism

As the demand for environmentally sustainable tourism grows, eco-labels are becoming increasingly popular as a signal of environmental quality. However, the existence of a causal link between awarding a seaside eco-label and the increase in tourism flows is still under discussion in the literature. In this article, we gauge the signalling impact of a specific eco-label, the Blue Flag award, using detailed data on tourism flows to seaside Italian destinations during the period 2008-2012. We adopt a recent econometric modelling strategy - the synthetic control method - in shaping estimation results and testing the sensitivity and robustness of our results. We find that being awarded the Blue Flag increases the flow of domestic tourists for up to three seasons after assignment. However, we find no effect for the flow of international tourists. Investigating the mechanisms driving the results, we find that the award of a Blue Flag only positively affects the flow of domestic tourists when it is used as a driver of organisation, coordination and integrated management of the tourism supply.