Vancouver International Airport (YVR) is providing incentives for international airlines to fly into and out of Vancouver in two ways. First of all, they will no longer have to pay an aviation and fuel tax, courtesy of the Federal government, effective April 1, 2012. Secondly, YVR is freezing landing and terminal fees at 2010 levels. These two incentives are expected to increase airline traffic and revenue for YVR in an example of putting the economic theory of Supply and Demand into practice. By eliminating the aviation and fuel tax as well as freezing landing costs, YVR has reduced its price of supply or airport utilization costs for the airlines. With the airline industry being extremely competitive, the profit margin for every airline’s routes would likely be thin. The demand curve for each of these routes would therefore be very elastic, with every reduction in the price of supply or cost of these routes resulting in a larger increase in the usage (quantity demanded) of these routes. The price reductions by YVR are therefore expected to result in a bigger increase in demand for YVR landings and to bring additional revenue and profit for the YVR.
Below is a link to the article:
http://www.vancouversun.com/travel/freeze+give+some+extra+lift/3554451/story.html