Airport subsidies impact on wellbeing of smaller regions: A systemic examination in New Zealand

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Airport subsidies impact on wellbeing of smaller regions: A systemic examination in New Zealand

Wu, Hanjun / Hong Tsui, Kan Wai / Ngo, Thanh / Lin, Yi-Hsin

Abstract This study investigated the inter-relationships among airport subsidies, air transport activity, and regional wellbeing by applying a three-stage least squares structural model using a panel dataset of New Zealand's regions from 2010 to 2019. By investigating these inter-relationships, the study provides empirical evidence of the necessity of implementing regional airport subsidies in New Zealand, and contributes to the regional aviation literature. The empirical findings reveal that implementing airport subsidies significantly increased scheduled flight seat capacity and helped unprofitable regional airports to increase their regional air transport activity. This study also shows that increases in airport subsidies can facilitate economic growth and employment in the region in which the airport is located. More importantly, this study empirically finds that regional air transport activity, economic growth, and environmental sustainability should be critical considerations when determining airport subsidies. These findings have profound implications for regional policymakers and airport stakeholders.

Highlights • Explore airport subsidies' impacts in New Zealand's regions. • Investigate relationships among airport subsidies, aviation activity and wellbeing. • Economic development should be factored into subsidy policy decision process. • Environmental sustainability is vital for determining airport subsidies.