Bilateral relationship between secondary airports and low-cost carriers

Relations bilatérales entre aéroports secondaires et compagnies à bas coût

Amaury Goguel, Maxence Miéra () and Stephane Vigeant ()
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Amaury Goguel: SKEMA Business School - SKEMA Business School
Maxence Miéra: UA - Université d'Artois, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Stephane Vigeant: Université de Lille, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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Abstract: A significant share of airline activities is characterized by bilateral relationships due to various market imperfections. Two important features of such bilateral relationships are bargaining power available to the contracting parties and the resulting trend to vertical integration. To highlight the corresponding effects and an "efficiency-based defense" approach, we develop a simple model including progressive congestion costs and economies of scale due to the presence of fixed costs. In this framework, we examine the output corresponding to airport power and the output corresponding to airline power. We then compare these results with output corresponding to integrated activity. We check whether some potential productive efficiency gains, well documented in literature, are not offset by allocative inefficiency and subsequent price increase. Our contribution seems to legitimate some flexibility concerning the competition assessment of vertical integration in such a market setting.

Keywords: Transport aérien; Pouvoir de négociation; Relations bilatérales; Intégration verticale; Gains d’efficacité (search for similar items in EconPapers)
Date: 2019-12-31
Note: View the original document on HAL open archive server: https://hal.science/hal-04184528
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Published in Les Cahiers Scientifiques du Transport / Scientific Papers in Transportation, 2019, 75 | 2019, pp.3-27. ⟨10.46298/cst.12180⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04184528

DOI: 10.46298/cst.12180

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