Low cost carriers, secondary airports and State aid: an economic assessment of the Charleroi affair

Cristina Barbot ()
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Cristina Barbot: CETE, Faculdade de Economia, Universidade do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In this paper a vertical differentiation model is built in order to analyse the effects of subsidies to secondary airports, or of lower prices set by them, on the competition between LCC’s and FSC’s. The Ryanair/ Charleroi agreement is used as an example and as a basis for the model. The main findings are that subsidisation (or lower airport charges) benefits consumers and negatively affects incumbent airlines. However, they may be more affected by competition than by the subsidy. An empirical analysis provides a few insights on LCC’s price strategies, namely that they retain rents resulting from lower aeronautical fees on dominated airports, and that their price strategy does not change with the presence of other LCC’s.

Keywords: Low cost carriers; airports; airline competition; State aid. (search for similar items in EconPapers)
JEL-codes: L93 (search for similar items in EconPapers)
Pages: 16 pages.
Date: 2004-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:159

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