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Airport incentive programs: A European perspective

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  • Malina, Robert
  • Albers, Sascha
  • Kroll, Nathalie
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    Abstract

    In this paper we investigate current pricing practices at the 200 biggest airports in the European Union. Our analysis shows that airport incentive programs are, in general, a common tool of airport pricing as they are used at one third of all airports. We also find evidence on the presence of bilateral agreements between airport operators or regional authorities on one side and airlines on the other side which serve as a substitute for published incentive programs. Geographically, usage of the different tools varies substantially between different EU countries. A detailed assessment of the incentive schemes offered at German airports within our broader European sample reveals that the average level of landing and take-off, parking and positioning and passenger charges is generally reduced by more than 10%, at smaller airports even by up to 44%. Given the usually low profit margin of airlines and that airport charges account for up to 10% of total operating costs, these incentives can have an important influence on the economic viability of a route. Moreover, in an airline's multi-criteria-based assessment of potential market entries or route expansions, such incentive schemes might compensate selected weaknesses of an airport's strategic posture. --

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    Bibliographic Info

    Paper provided by University of Cologne, Department of Business Policy and Logistics in its series Working Paper Series with number 107.

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    Date of creation: 2011
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    Handle: RePEc:zbw:ucdbpl:107

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    Keywords: Air Transport; Airports; Pricing; Management; Regulation;

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    1. Richard K. Green, 2007. "Airports and Economic Development," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 35(1), pages 91-112, 03.
    2. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 152, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 870-75, September.
    4. Warnock-Smith, David & Potter, Andrew, 2005. "An exploratory study into airport choice factors for European low-cost airlines," Journal of Air Transport Management, Elsevier, Elsevier, vol. 11(6), pages 388-392.
    5. Friedrich Gröteke & Wolfgang Kerber, 2004. "The Case of Ryanair – EU State Aid Policy on the Wrong Runway," Marburg Working Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200413, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Gillen, David & Hinsch, Holger, 2001. "Measuring the economic impact of liberalization of international aviation on Hamburg airport," Journal of Air Transport Management, Elsevier, Elsevier, vol. 7(1), pages 25-34.
    7. Barbot, Cristina, 2006. "Low-cost airlines, secondary airports, and state aid: An economic assessment of the Ryanair–Charleroi Airport agreement," Journal of Air Transport Management, Elsevier, Elsevier, vol. 12(4), pages 197-203.
    8. Gillen, David, 2011. "The evolution of airport ownership and governance," Journal of Air Transport Management, Elsevier, Elsevier, vol. 17(1), pages 3-13.
    9. Lohmann, Guilherme & Albers, Sascha & Koch, Benjamin & Pavlovich, Kathryn, 2009. "From hub to tourist destination – An explorative study of Singapore and Dubai's aviation-based transformation," Journal of Air Transport Management, Elsevier, Elsevier, vol. 15(5), pages 205-211.
    10. Marco Percoco, 2010. "Airport Activity and Local Development: Evidence from Italy," Urban Studies, Urban Studies Journal Limited, Urban Studies Journal Limited, vol. 47(11), pages 2427-2443, October.
    11. David Starkie, 2001. "Reforming UK Airport Regulation," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 35(1), pages 119-135, January.
    12. Johannes Fuhr & Thorsten Beckers, 2008. "Contract Design, Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model," Transport Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(4), pages 459-478, September.
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    Cited by:
    1. Allroggen, Florian & Malina, Robert & Lenz, Ann-Katrin, 2013. "Which factors impact on the presence of incentives for route and traffic development? Econometric evidence from European airports," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 60(C), pages 49-61.

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