Low-cost carriers means low-cost tourists? Exploring the expenditure patterns beyond airline ticket prices

Abstract

This paper investigates the relationship between air travel and international tourism expenditure, with a focus on distinguishing the impacts of low-cost carriers (LCCs) and full-service carriers (FSCs). Leveraging a unique dataset of 407,116 individual-level observations from the Bank of Italy’s survey on international tourists in Italy (2013–2019), combined with seat capacity data from the Official Airline Guide (OAG), we analyze spending behavior across diverse categories. Our findings reveal that air travelers spend 18.4% more than non-air travelers; however, tourists flying with LCCs are associated with significantly lower expenditure than those using FSCs. Crucially, this behavior is not solely driven by lower airfares, as LCCs continue to attract cost-conscious tourists even when fares are comparable to FSCs. This nuanced relationship underscores the influence of switching costs, service perceptions, and carrier familiarity on consumer choices. These findings contribute to the broader understanding of consumer behavior in the air transport industry, with implications for optimizing economic and environmental outcomes.