IDEAS home Printed from https://ideas.repec.org/a/eee/transb/v196y2025ics0191261525000712.html
   My bibliography  Save this article

Airport charge, terminal capacity, and suggested airport arrival time: Considering non-aeronautical business

Author

Listed:
  • Huai, Yue
  • Lee, Enoch
  • Lo, Hong K.
  • Zhang, Anming

Abstract

This study investigates the optimal decisions of airports regarding charges, capacity, and passengers’ suggested arrival time at the airport (before flight departures) under different objectives (maximizing airport profit or social welfare). Our model incorporates an airport, airlines with market power, and passengers, and examines the impact on concession revenue of dwell time in (terminal) retail zones and queuing time in check-in zones. We find that whether a profit-maximizing airport charges or subsidizes airlines for using its aeronautical service depends critically on whether the trip demand is elastic with respect to airport charge and whether trip demand increases the concession surplus. In particular, when this is elastic and the trip demand also raises concession revenue, the airport will subsidize airlines. For welfare-maximizing airports, when trip demand decreases the concession surplus (due to shopping time shrinkage), airports would set the charge that the ticket price paid by passengers is higher than the social marginal cost incurred. Further, the airport’s decisions regarding terminal capacity are influenced by the trade-off between the revenue gained from increased traffic and the revenue lost from the reduced dwell time. By comparison with a welfare-maximizing airport, a profit-maximizing airport tends to invest more in terminal capacity under lower traffic, but less under higher traffic: basically, the effect of expanding terminal capacity on increasing shopping time (dwell time in the retail zone) is more pronounced for lower traffic, and the effect diminishes for higher traffic. The study also shows that a profit-maximizing airport would suggest travelers arrive at the airport earlier than a welfare-maximizing airport, so as to increase the non-aeronautical revenue.

Suggested Citation

  • Huai, Yue & Lee, Enoch & Lo, Hong K. & Zhang, Anming, 2025. "Airport charge, terminal capacity, and suggested airport arrival time: Considering non-aeronautical business," Transportation Research Part B: Methodological, Elsevier, vol. 196(C).
  • Handle: RePEc:eee:transb:v:196:y:2025:i:c:s0191261525000712
    DOI: 10.1016/j.trb.2025.103222
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0191261525000712
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.trb.2025.103222?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Graham, Anne, 2009. "How important are commercial revenues to today's airports?," Journal of Air Transport Management, Elsevier, vol. 15(3), pages 106-111.
    2. Jiang, Changmin & Zhang, Anming, 2015. "Airport congestion pricing and terminal investment: Effects of terminal congestion, passenger types, and concessionsAuthor-Name: Wan, Yulai," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 91-113.
    3. Xiaowen Fu & Anming Zhang, 2010. "Effects of Airport Concession Revenue Sharing on Airline Competition and Social Welfare," Journal of Transport Economics and Policy, University of Bath, vol. 44(2), pages 119-138, May.
    4. Lo, Hong K. & Luo, X.W. & Siu, Barbara W.Y., 2006. "Degradable transport network: Travel time budget of travelers with heterogeneous risk aversion," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 792-806, November.
    5. Lin, Ming Hsin & Zhang, Anming, 2016. "Hub congestion pricing: Discriminatory passenger charges," Economics of Transportation, Elsevier, vol. 5(C), pages 37-48.
    6. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    7. Zhang, Anming & Zhang, Yimin, 2003. "Airport charges and capacity expansion: effects of concessions and privatization," Journal of Urban Economics, Elsevier, vol. 53(1), pages 54-75, January.
    8. Volodymyr Bilotkach & Joseph Clougherty & Juergen Mueller & Anming Zhang, 2012. "Regulation, privatization, and airport charges: panel data evidence from European airports," Journal of Regulatory Economics, Springer, vol. 42(1), pages 73-94, August.
    9. Czerny, Achim I. & Zhang, Anming, 2015. "How to mix per-flight and per-passenger based airport charges," Transportation Research Part A: Policy and Practice, Elsevier, vol. 71(C), pages 77-95.
    10. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-370, March.
    11. Odoni, Amedeo R. & de Neufville, Richard, 1992. "Passenger terminal design," Transportation Research Part A: Policy and Practice, Elsevier, vol. 26(1), pages 27-35, January.
    12. Huai, Yue & Lo, Hong K. & Ng, Ka Fai, 2021. "Monocentric versus polycentric urban structure: Case study in Hong Kong," Transportation Research Part A: Policy and Practice, Elsevier, vol. 151(C), pages 99-118.
    13. Kidokoro, Yukihiro & Zhang, Anming, 2023. "Single-till regulation, dual-till regulation, and regulatory capture: When does a regulatory authority favor single-till regulation over dual-till regulation?," Economics of Transportation, Elsevier, vol. 33(C).
    14. Karanki, Fecri & Lim, Siew Hoon & Choi, Bong Jin, 2020. "The determinants of aeronautical charges of U.S. airports: A spatial analysis," Journal of Air Transport Management, Elsevier, vol. 86(C).
    15. Huai, Yue & Lee, Enoch & Lo, Hong K. & Zhang, Anming, 2025. "Airport's optimal decisions considering non-aeronautical business, terminal capacity and alternative regulatory regimes," Transportation Research Part B: Methodological, Elsevier, vol. 195(C).
    16. Choi, Jong Hae, 2021. "Changes in airport operating procedures and implications for airport strategies post-COVID-19," Journal of Air Transport Management, Elsevier, vol. 94(C).
    17. Kidokoro, Yukihiro & Lin, Ming Hsin & Zhang, Anming, 2016. "A general-equilibrium analysis of airport pricing, capacity, and regulation," Journal of Urban Economics, Elsevier, vol. 96(C), pages 142-155.
    18. Lin, Ming Hsin & Zhang, Yimin, 2017. "Hub-airport congestion pricing and capacity investment," Transportation Research Part B: Methodological, Elsevier, vol. 101(C), pages 89-106.
    19. Lin, Yi-Hsin & Chen, Ching-Fu, 2013. "Passengers' shopping motivations and commercial activities at airports – The moderating effects of time pressure and impulse buying tendency," Tourism Management, Elsevier, vol. 36(C), pages 426-434.
    20. Torres, E. & Domínguez, J.S. & Valdés, L. & Aza, R., 2005. "Passenger waiting time in an airport and expenditure carried out in the commercial area," Journal of Air Transport Management, Elsevier, vol. 11(6), pages 363-367.
    21. Kidokoro, Yukihiro & Zhang, Anming, 2022. "Airport cities and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 187-209.
    22. Tiziana D’Alfonso & Valentina Bracaglia, 2017. "Two-Sidedness and Welfare Neutrality in Airport Concessions," Advances in Airline Economics, in: The Economics of Airport Operations, volume 6, pages 49-68, Emerald Group Publishing Limited.
    23. Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
    24. Lin, Ming Hsin, 2021. "Airport pricing and capacity: Schedule versus congestion delays," Research in Transportation Economics, Elsevier, vol. 90(C).
    25. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    26. Castillo-Manzano, José I., 2010. "Determinants of commercial revenues at airports: Lessons learned from Spanish regional airports," Tourism Management, Elsevier, vol. 31(6), pages 788-796.
    27. Tiziana D'Alfonso & Changmin Jiang & Yulai Wan, 2013. "Airport Pricing, Concession Revenues and Passenger Types," Journal of Transport Economics and Policy, University of Bath, vol. 47(1), pages 71-89, January.
    28. Huai, Yue & Lo, Hong K. & Zhang, Anming, 2025. "Optimal private housing supply under various schemes of public housing provision," Transportation Research Part B: Methodological, Elsevier, vol. 196(C).
    29. MA, Xiaosu & LO, Hong K., 2013. "On joint railway and housing development strategy," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 451-467.
    30. Zhang, Anming & Zhang, Yimin, 2010. "Airport capacity and congestion pricing with both aeronautical and commercial operations," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 404-413, March.
    31. Ng, Ka Fai & Lo, Hong K., 2017. "On joint railway and housing development: Housing-led versus railway-led schemes," Transportation Research Part B: Methodological, Elsevier, vol. 106(C), pages 464-488.
    32. Morrison, Steven A., 1987. "The equity and efficiency of runway pricing," Journal of Public Economics, Elsevier, vol. 34(1), pages 45-60, October.
    33. Daniel, Joseph I. & Harback, Katherine Thomas, 2008. "(When) Do hub airlines internalize their self-imposed congestion delays?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 583-612, March.
    34. Yimeng Chen & Cheng-Lung Wu & Tay T.R. Koo & Ian Douglas, 2020. "Determinants of airport retail revenue: a review of literature," Transport Reviews, Taylor & Francis Journals, vol. 40(4), pages 479-505, July.
    35. Starkie, David, 2002. "Airport regulation and competition," Journal of Air Transport Management, Elsevier, vol. 8(1), pages 63-72.
    36. Karanki, Fecri & Zhang, Anming, 2025. "Concession revenues and delay reduction efforts: Case of U.S. Airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 192(C).
    37. Choi, Jong Hae & Park, Yonghwa, 2022. "Exploring passenger and flight characteristics' impacts on airport retail income: Evidence from Incheon International Airport," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    38. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
    39. Chung, Yi-Shih & Ku, Ya-Han, 2023. "Effect of time stress and store visibility on the dynamics of passenger activity choices at airport terminals based on indoor trajectory data," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    40. Wu, You & Morlotti, Chiara & Mantin, Benny, 2024. "Shopping or dining? On passenger dwell time and non-aeronautical revenues," Journal of Air Transport Management, Elsevier, vol. 118(C).
    41. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    42. Czerny, Achim I., 2013. "Public versus private airport behavior when concession revenues exist," Economics of Transportation, Elsevier, vol. 2(1), pages 38-46.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huai, Yue & Lo, Hong K. & Zhang, Anming, 2025. "Optimal private housing supply under various schemes of public housing provision," Transportation Research Part B: Methodological, Elsevier, vol. 196(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huai, Yue & Lee, Enoch & Lo, Hong K. & Zhang, Anming, 2025. "Airport's optimal decisions considering non-aeronautical business, terminal capacity and alternative regulatory regimes," Transportation Research Part B: Methodological, Elsevier, vol. 195(C).
    2. Karanki, Fecri & Zhang, Anming, 2025. "Concession revenues and delay reduction efforts: Case of U.S. Airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 192(C).
    3. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    4. Zheng, Shiyuan & Zhang, Anming & Wang, Kun & Fu, Xiaowen, 2025. "Airport city and downtown store competition and regulation under incomplete information," Transportation Research Part B: Methodological, Elsevier, vol. 192(C).
    5. Jiang, Changmin & Zhang, Anming, 2015. "Airport congestion pricing and terminal investment: Effects of terminal congestion, passenger types, and concessionsAuthor-Name: Wan, Yulai," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 91-113.
    6. Kidokoro, Yukihiro & Lin, Ming Hsin & Zhang, Anming, 2016. "A general-equilibrium analysis of airport pricing, capacity, and regulation," Journal of Urban Economics, Elsevier, vol. 96(C), pages 142-155.
    7. Kidokoro, Yukihiro & Zhang, Anming, 2022. "Airport cities and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 187-209.
    8. Choo, Yap Yin & Corbo, Leonardo & Wang, Kun, 2018. "Joint impact of airline market structure and airport ownership on airport market power and profit margin," Transport Policy, Elsevier, vol. 72(C), pages 67-78.
    9. Czerny, Achim I. & Zhang, Hanxiang, 2020. "Rivalry between airport ancillary and city-center supplies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    10. Kenneth Button, 2020. "Studying the empirical implications of the liberalization of airport markets," Competition and Regulation in Network Industries, , vol. 21(3), pages 223-243, September.
    11. Dixit, Aasheesh & Jakhar, Suresh Kumar, 2021. "Airport capacity management: A review and bibliometric analysis," Journal of Air Transport Management, Elsevier, vol. 91(C).
    12. Czerny, Achim I., 2013. "Public versus private airport behavior when concession revenues exist," Economics of Transportation, Elsevier, vol. 2(1), pages 38-46.
    13. Álvarez-Sanjaime, Óscar & Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, Jose J., 2020. "A three-stage competition game in an air transport network under asymmetric valuation of flight frequencies," Economics of Transportation, Elsevier, vol. 21(C).
    14. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2016. "Airport capacity choice under airport-airline vertical arrangements," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 298-309.
    15. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2013. "Demand uncertainty and airport capacity choice," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 91-104.
    16. Lin, Ming Hsin, 2025. "Airport congestion pricing and capacity: Cost recovery with per-flight or per-passenger charges," Economics of Transportation, Elsevier, vol. 42(C).
    17. Czerny, Achim I. & Cowan, Simon & Zhang, Anming, 2017. "How to mix per-flight and per-passenger based airport charges: The oligopoly case," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 483-500.
    18. Bracaglia, Valentina & D׳Alfonso, Tiziana & Nastasi, Alberto, 2014. "Competition between multiproduct airports," Economics of Transportation, Elsevier, vol. 3(4), pages 270-281.
    19. Noruzoliaee, Mohamadhossein & Zou, Bo & Zhang, Anming, 2015. "Airport partial and full privatization in a multi-airport region: Focus on pricing and capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 77(C), pages 45-60.
    20. Guo, Huanxiu & Jiang, Changmin & Wan, Yulai, 2018. "Can airfares tell? An alternative empirical strategy for airport congestion internalization," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 648-661.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transb:v:196:y:2025:i:c:s0191261525000712. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.