A Case Study on Germany's Aviation Tax Using the Synthetic Control Approach

The German Aviation Tax (AT) is a tax levied on departing passengers from German airports. The synthetic control method is used to generate counterfactual passenger numbers for German airports, and for airports outside Germany but near the German border. The results presented are consistent with cross-border substitution of passenger demand in response to AT. Most AT exempt airports near the borders have made sizable, significant, gains in passenger numbers since Germany introduced AT. Within Germany there appears to be a clear distinction in the impact on small/regional airports and that on larger hubs.