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The Home Carrier Advantage in Civil Aviation

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Author Info
Mark Lijesen () (Netherlands Bureau for Economic Policy Analysis (CPB))
Peter Nijkamp () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)
Eric Pels () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

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Abstract

This paper analyzes the relative economic power position of home carriers in hub-and-spoke systems. Hub-and-spoke systems may lower costs on densely traveled routes and enable economically viable operations on less densely traveled routes. The reverse side is probably that carriers enjoy significant market power at their home base, often labeled the home carrier advantage. The paper offers a concise overview of the literature in this field, and addresses next empirically this issue for European home carriers. We found empirically that at least some European carriers charge premiums for flights originating from their hubs. The hub premiums of Lufthansa, Swissair and Air France are significantly higher than those of the other companies in our sample.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-011/3.

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Date of creation: 21 Jan 2005
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Handle: RePEc:dgr:uvatin:20050011

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Related research
Keywords: Airlines airports networks homecarrier advantage

Find related papers by JEL classification:
R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion
D4 - Microeconomics - - Market Structure and Pricing

References listed on IDEAS
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  1. James A. Brander & Anming Zhang, 1990. "Market Conduct in the Airline Industry: An Empirical Investigation," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 567-583, Winter. [Downloadable!] (restricted)
  2. Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-99, May. [Downloadable!] (restricted)
  3. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December. [Downloadable!] (restricted)
  4. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law & Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  6. Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-35, December. [Downloadable!] (restricted)
  7. Brander, James A. & Zhang, Anming, 1993. "Dynamic oligopoly behaviour in the airline industry," International Journal of Industrial Organization, Elsevier, vol. 11(3), pages 407-435, September. [Downloadable!] (restricted)
  8. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn. [Downloadable!] (restricted)
  9. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2004. "The Entry of Low-Cost Airlines: Price Competition in the European Airline Market," Tinbergen Institute Discussion Papers 04-074/3, Tinbergen Institute. [Downloadable!]
  10. Daniel, Joseph I. & Pahwa, Munish, 2000. "Comparison of Three Empirical Models of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 47(1), pages 1-38, January. [Downloadable!] (restricted)
  11. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September. [Downloadable!] (restricted)
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