1 The impact of airport fees on fares for the leisure air travel market: the case of Spain Rubén Sainz González Universidad de Cantabria and Zaragoza Logistic Center. Avda. de los Castros s/n 39005. Santander (Spain). +3494202076. sainzru@unican.es Ramón Núnez-Sánchez Universidad de Cantabria. Avda. de los Castros s/n 39005. Santander (Spain). +34942201285. nunezr@unican.es Pablo Coto-Millán Universidad de Cantabria. Avda. de los Castros s/n 39005. Santander (Spain). +34942202653. cotop@unican.es Abstract A panel data is used to determine the incidence of airport fees on fares in the Spanish leisure market airlines. We also study its structure through an empirical specification of a pricing and demand equation system. The results show the existence of market power, strategic behaviour and density economics. We also demonstrate that airlines pass all the airport fees onto customers by increasing fares. Furthermore, we find that the behavior of airlines in routes with the presence of low cost carriers do not differ from other routes. Keywords: Airport fees, airline market, price elasticity of demand, low-cost carriers. 1. Introduction During the last few years we have witnessed an interesting debate in connection with the growing importance of airport fees in the final price of plane tickets. On the one hand, airline companies consider that the increase in airport fees as well as the introduction of new taxes has a considerable negative effect on their final income. On the other hand, airport operators justify these fees to finance new investment which increases and improves capacity in airports and besides, serve as a way to correct negative externalities produced by the airport industry. It is also well known that the economic situation in the last few years, whose principal effect has been a decrease in airline demand, together with growing competence in the