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Airport capacity choice under airport-airline vertical arrangements

Listed author(s):
  • Xiao, Yibin
  • Fu, Xiaowen
  • Zhang, Anming
Registered author(s):

    This study investigates the effects of airport-airline vertical arrangements on airport capacity choices under demand uncertainty. A multi-stage game is analysed, in which competing airlines contribute to capacity investments and share airport revenues. Our analytical results suggest that for a profit-maximising airport, such a vertical arrangement leads to higher capacity but may not increase its profit, whereas for a welfare-maximising airport, such an arrangement has no effect on capacity or welfare. Capital cost savings brought by airport-airline cooperation, if any, always lead to higher capacity, and to higher profit for a profit-maximising airport and higher welfare for a welfare-maximising airport. Numerical simulations reveal that win-win outcomes may be achieved for an airport and its airlines without government intervention.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0965856416305286
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    Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

    Volume (Year): 92 (2016)
    Issue (Month): C ()
    Pages: 298-309

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    Handle: RePEc:eee:transa:v:92:y:2016:i:c:p:298-309
    DOI: 10.1016/j.tra.2016.06.012
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