Assessing the boundaries of the airport services market: Grounds for tariff deregulation

Andrey E. Shastitko and Natalya S. Pavlova
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Andrey E. Shastitko: Lomonosov Moscow State University, Moscow, Russia
Natalya S. Pavlova: Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia

Upravlenets, 2023, vol. 14, issue 5, 2-15

Abstract: The aviation industry has recently witnessed a series of crises that changed its competitive landscape. In Russia, due to passenger flows redirected to domestic flights and the growing role of large airports as hubs, there are reasons to deregulate tariffs for airport services on domestic flights. Pulkovo (Saint Petersburg, Russia) is among the airports facing this issue. However, deregulation implies sufficient competitive pressure from other airports, in particular those included in the Moscow Aviation Hub (MAH). The article assesses the geographical boundaries of the market where the Pulkovo Airport operates, in order to establish whether it is the same market for the MAH airports. Methodologically, the study relies on the principles of industrial organization theory. Among the research methods are the hypothetical monopolist test and critical loss analysis. Empirical evidence covers data of an online survey conducted in March 2023 with 1,613 respondents who made domestic flights in 2019–2023. The analysis of the market in which Pulkovo provides its services shows that its boundaries extend beyond Saint Petersburg and cover at least Moscow airports, which indicates that Pulkovo is up against strong competition from Moscow airports in terms of domestic destinations. Thus, it seems expedient to deregulate the Pulkovo airport’s tariffs on domestic flights.

Keywords: antitrust law; market boundaries; natural monopoly; competition; airports; hypothetical monopolist test; critical loss analysis (search for similar items in EconPapers)
JEL-codes: K21 K23 L98 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.29141/2218-5003-2023-14-5-1

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