State Aids granted by regional airports: a two-sided market analysis

Estelle Malavolti () and Frédéric Marty
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Estelle Malavolti: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, ENAC - Ecole Nationale de l'Aviation Civile

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Abstract: A lot of cases had arouse in the past decade about agreements between regional airports and low-cost carriers. These agreements are challenged on the basis of the State Aids European control as they rise concerns not only about competition distortions between airlines but also about fiscal competition risks among Member States or local governments. Such phenomena could be expected as regional airports are characterized by significant overcapacities and overlapping inducing a substitutability for airlines. Surprisingly, the new 2014 guidelines on State Aids granted to airlines open the way to transitory operating aid schemes, an option apparently at odds with the European longstanding principles. Our purpose in this paper is to demonstrate with the help of the development of a model, that such agreements can make sense from the economic point of view provided that the relationship between the carrier and the airport is no longer analyzed as a vertical chain, inducing an assessment in terms of economic dependence, but as a two-sided market. The favorable usage terms granted to low cost carriers generate additional flows on the other side, with commercial revenues from shops or parking. Consequently, subsidizing operating costs might be rational, even for a private investor in a market economy, and might be a perennial device.

Keywords: air transport economics; state aids; two-sided market (search for similar items in EconPapers)
Date: 2016-07-10
New Economics Papers: this item is included in nep-tre and nep-ure
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Published in WCTR 2016, World Conference on Transport Research, Jul 2016, Shanghai, China. pp.30-40, ⟨10.1016/j.trpro.2017.05.195⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01538698

DOI: 10.1016/j.trpro.2017.05.195

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