Fare differences between domestic and international air markets on routes from Gran Canaria

Abstract

This paper examines whether airline prices on domestic Spanish routes are higher than those on international routes. We estimate a pricing equation for all routes originating from Gran Canaria, differentiating between national and international routes. A key difference between these route types is that island residents benefit from discounts on domestic flights. When controlling for variables related to airline characteristics, market structure and demand, we find that national passengers who are non-residents on the islands are paying higher prices than international passengers.