Airport capacity choice under airport-airline vertical arrangements

Yibin Xiao, Xiaowen Fu and Anming Zhang

Transportation Research Part A: Policy and Practice, 2016, vol. 92, issue C, 298-309

Abstract: This study investigates the effects of airport-airline vertical arrangements on airport capacity choices under demand uncertainty. A multi-stage game is analysed, in which competing airlines contribute to capacity investments and share airport revenues. Our analytical results suggest that for a profit-maximising airport, such a vertical arrangement leads to higher capacity but may not increase its profit, whereas for a welfare-maximising airport, such an arrangement has no effect on capacity or welfare. Capital cost savings brought by airport-airline cooperation, if any, always lead to higher capacity, and to higher profit for a profit-maximising airport and higher welfare for a welfare-maximising airport. Numerical simulations reveal that win-win outcomes may be achieved for an airport and its airlines without government intervention.

Keywords: Airport capacity; Airport-airline vertical arrangement; Demand uncertainty (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (19)

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DOI: 10.1016/j.tra.2016.06.012

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