The Impact of Airport Congestion on Airfares: A Case Study on Lebanon

Aviation is a vital component of the global economic scheme. The aviation sector contributes to the global economy with around USD 2.7 trillion (including direct, indirect, and catalytic effect), which is equivalent to 3.6% of the global GDP. Looking at Lebanon, according to IATA, in 2019, the air transport sector generated around USD 5.8 billion (direct impact).Despite the positive figures mentioned, the aviation infrastructure in Lebanon has been suffering from capacity constraints since the year 2012, where demand has exceeded capacity. Furthermore, no serious steps have been taken by the authorities to improve this bottleneck. Generally, when airports are congested, airlines deploy additional capacity at premium fares, to maximize revenue returns. This study developed an econometric analysis to assess if airlines are benefiting from capacity constraints at Rafik Hariri International Airport in Beirut - Lebanon and charging high airfares, considering that passengers do not have any alternative to travel to and from Lebanon. A sample of 480 observations was analyzed on SPSS software to determine the relation between capacity constraints and airfares considering also other determinants. Regression results revealed that congestion directly affects airfares.