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Airport–airline vertical relationships, their effects and regulatory policy implications

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  • Fu, Xiaowen
  • Homsombat, Winai
  • Oum, Tae H.

Abstract

This paper examines the forms and effects of vertical relationships between airports and airlines with a focus on the North American and European aviation markets. We find that such vertical relationships enables those participating to achieve various benefits and may be formed as a competitive response to other competing airport–airline alliances. In some cases, vertical airport–airline relationships strengthen the hub status of major airports, leading to increased employment and service quality in local markets. On the other hand, preferential treatment of a particular airline by an airport may enhance that airline’s market power, allowing it to dominate the airport and charge hub premiums. The competition and welfare implications of airport–airline vertical alliances can be complicated and two-sided, subject to the influences of other factors such as the market structures of the airline and airport markets.

Suggested Citation

  • Fu, Xiaowen & Homsombat, Winai & Oum, Tae H., 2011. "Airport–airline vertical relationships, their effects and regulatory policy implications," Journal of Air Transport Management, Elsevier, vol. 17(6), pages 347-353.
    • Handle: RePEc:eee:jaitra:v:17:y:2011:i:6:p:347-353
    DOI: 10.1016/j.jairtraman.2011.02.004
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