Low-cost carriers and tourism dynamics: A global panel analysis of demand, supply, and economic impact
Year: 2025
Type: article
Abstract: • Low-cost carriers (LCCs) significantly boost international tourist arrivals. • LCC-driven tourism growth is stronger in non-high-income countries. • Increased tourist arrivals stimulate accommodation sector expansion. • Policy support for LCCs and infrastructure is key to maximizing tourism benefits. This study examines how low-cost carriers (LCCs) shape tourism systems across high-income and non-high-income economies. We analyze demand (international tourist arrivals, ITA), supply (accommodation capacity), and a distinct labor-market outcome (tourism employment) treated separately from accommodation supply. Using an unbalanced annual panel of 52 countries from 2010 to 2022, we estimate log-linear two-way fixed effects models and address endogeneity with instrumental-variables (2SLS) and two-step system GMM. We find that LCC expansion significantly increases ITA, with larger effects in non-high-income economies where affordable air travel is a key driver of market growth. Higher ITA is associated with subsequent growth in accommodation capacity, especially in economies more reliant on tourism revenue. By contrast, short-run fluctuations in ITA have limited direct effects on tourism employment, which appears more closely tied to labor-force size and institutional factors. Results are robust across alternative specifications. Policy implications include investing in airport and intermodal capacity, maintaining pro-competition regulation for LCCs, and targeting workforce development to better align skills with seasonal and regional demand. We advance a three-pillar perspective, uncover income-group heterogeneity, and compile a harmonized cross-country LCC dataset.
Language: English
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,400
OpenAlex ID: W4416349831