What term describes a direct payment of airport revenue to a carrier in exchange for additional service?

• A. Subsidy
• B. Incentive
• C. Grant
• D. Tax Credit

Answer: (A)

A subsidy is a direct payment of airport revenue to a carrier to support or increase service. In airport economics, subsidies are used to ensure routes remain active by providing cash transfers to airlines, especially on less profitable or underserved markets. This is different from incentives, which are broader and may include promises or non-cash benefits rather than a direct cash transfer of airport revenue. Grants are typically one-time funds for specific projects and aren’t tied to ongoing service, and tax credits reduce tax liability rather than providing a direct cash payment to a carrier. Therefore, the direct payment of airport revenue to a carrier in exchange for additional service fits the concept of a subsidy.