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Limited Access to Airport Facilities and Market Power in the Airline Industry

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  • Ciliberto, Federico
  • Williams, Jonathan

Abstract

We investigate the role of limited access to airport facilities as a determinant of the hub premium in the US airline industry. We use original data from competition plans that airports are required to submit to the Department of Transportation in compliance with the Aviation Investment and Reform Act for the 21st Century. We collect information on the availability and control of airport gates, leasing arrangements, and other restrictions limiting the expansion of airport facilities. We �nd that the hub premium is increasing in the ticket fare. We �nd that control of gates is a crucial determinant of this premium. Limits on the fees that airlines can charge for subleasing their gates lower the prices charged by airlines. Finally, control of gates and restrictions on sublease fees explain high fares only when there is a scarcity of gates relative to the number of departures out of an airport.

Suggested Citation

  • Ciliberto, Federico & Williams, Jonathan, 2009. "Limited Access to Airport Facilities and Market Power in the Airline Industry," MPRA Paper 24889, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24889
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    More about this item

    Keywords

    Market Power; Airline Industry; Barriers to Entry; Hub Premium; Airport Facilities;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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