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Airport charges and cost recovery: the long-run view

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  • Zhang, Anming
  • Zhang, Yimin

Abstract

This paper shows that when the policy of financial break-even is implemented, “strict†financial break-even on an annual, or even short-run, basis may not be socially desirable. To maximize social welfare, airports should be allowed to take losses, or make profits, at different times while achieving break-even only in the long run. In particular, with economies growing over time, socially optimal pricing for a new airport can involve deficit in its early years and surplus in its later years. Over its entire life span, however, the airport can still achieve cost recovery.

Suggested Citation

  • Zhang, Anming & Zhang, Yimin, 2001. "Airport charges and cost recovery: the long-run view," Journal of Air Transport Management, Elsevier, vol. 7(1), pages 75-78.
  • Handle: RePEc:eee:jaitra:v:7:y:2001:i:1:p:75-78
    DOI: 10.1016/S0969-6997(00)00024-7
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    References listed on IDEAS

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    1. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 287-296, December.
    2. Oum, Tae Hoon & Zhang, Anming & Zhang, Yimin, 1996. "A note on optimal airport pricing in a hub-and-spoke system," Transportation Research Part B: Methodological, Elsevier, vol. 30(1), pages 11-18, February.
    3. Levine, Michael E, 1969. "Landing Fees and the Airport Congestion Problem," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 79-108, April.
    4. Morrison, Steven A., 1987. "The equity and efficiency of runway pricing," Journal of Public Economics, Elsevier, vol. 34(1), pages 45-60, October.
    5. Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, vol. 60(3), pages 310-319, June.
    6. Mohring, Herbert, 1970. "The Peak Load Problem with Increasing Returns and Pricing Constraints," American Economic Review, American Economic Association, vol. 60(4), pages 693-705, September.
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    Cited by:

    1. Li, Sui-Ling, 2014. "The cost allocation approach of airport service activities," Journal of Air Transport Management, Elsevier, vol. 38(C), pages 48-53.

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