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A three-stage competition game in an air transport network under asymmetric valuation of flight frequencies

Author

Listed:
  • Alvarez-Sanjaime, Oscar
  • Cantos-Sanchez, Pedro
  • Moner-Colonques, Rafael
  • Sempere-Monerris, Jose J.

Abstract

This paper analyzes the effects of changes in aeronautical charges as brought by several airport management regimes on the air transport industry. Airlines compete on both price and non-prices variables, where connecting passengers have asymmetric valuations of flight frequencies in different legs. Changes in landing fees trigger airlines reactions on flight frequencies and airfares, whose sign depends on the weight attached to flight frequencies. Thus, an increase in the spoke landing fee leads to more international flights under low valuations of frequencies at spoke airports. Simulation exercises show that profit-maximizing aeronautical charges only at the spoke airport are preferable to those either only at the hub airport or at both airports. Welfare losses are lower when airports are granted to a unique infrastructure manager rather than to independent ones. When frequencies in the hub are highly valued, profit-maximizing charges only at the spoke airport will likely induce a welfare increase.
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Suggested Citation

  • Alvarez-Sanjaime, Oscar & Cantos-Sanchez, 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," LIDAM Reprints CORE 3103, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3103
    Note: In : Economics of Transportation, Vol. 21, p. 100141 (2020)
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    Cited by:

    1. Álvarez-SanJaime, Óscar & Cantos-Sanchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, Jose J., 2021. "The effect of cooperative infrastructure fees on high-speed rail and airline competition," Transport Policy, Elsevier, vol. 112(C), pages 125-141.
    2. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.
    3. Chen, Jihui, 2024. "The pricing and quality effects of network structure choice: Evidence from American airlines’ international route cancellations," Journal of Air Transport Management, Elsevier, vol. 114(C).
    4. Cantos-Sanchez, Pedro & Moner-Colonques, Rafael & Ruiz-Buforn, Alba & Sempere-Monerris, Jose J., 2024. "Should short-haul flights be banned? A simple transportation network analysis," Economics of Transportation, Elsevier, vol. 39(C).
    5. Till Kösters & Marlena Meier & Gernot Sieg, 2023. "Effects of the use-it-or-lose-it rule on airline strategy and climate," Working Papers 36, Institute of Transport Economics, University of Muenster.

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