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Low cost carriers, secondary airports and State aid: an economic assessment of the Charleroi affair

Author

Listed:
  • Cristina Barbot

    () (CETE, Faculdade de Economia, Universidade do Porto)

Abstract

In this paper a vertical differentiation model is built in order to analyse the effects of subsidies to secondary airports, or of lower prices set by them, on the competition between LCC’s and FSC’s. The Ryanair/ Charleroi agreement is used as an example and as a basis for the model. The main findings are that subsidisation (or lower airport charges) benefits consumers and negatively affects incumbent airlines. However, they may be more affected by competition than by the subsidy. An empirical analysis provides a few insights on LCC’s price strategies, namely that they retain rents resulting from lower aeronautical fees on dominated airports, and that their price strategy does not change with the presence of other LCC’s.

Suggested Citation

  • Cristina Barbot, 2004. "Low cost carriers, secondary airports and State aid: an economic assessment of the Charleroi affair," FEP Working Papers 159, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:159
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Low cost carriers; airports; airline competition; State aid.;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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