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Airport incentive programs: A European perspective

  • Malina, Robert
  • Albers, Sascha
  • Kroll, Nathalie
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    In this paper we investigate current pricing practices at the 200 biggest airports in the European Union. Our analysis shows that airport incentive programs are, in general, a common tool of airport pricing as they are used at one third of all airports. We also find evidence on the presence of bilateral agreements between airport operators or regional authorities on one side and airlines on the other side which serve as a substitute for published incentive programs. Geographically, usage of the different tools varies substantially between different EU countries. A detailed assessment of the incentive schemes offered at German airports within our broader European sample reveals that the average level of landing and take-off, parking and positioning and passenger charges is generally reduced by more than 10%, at smaller airports even by up to 44%. Given the usually low profit margin of airlines and that airport charges account for up to 10% of total operating costs, these incentives can have an important influence on the economic viability of a route. Moreover, in an airline's multi-criteria-based assessment of potential market entries or route expansions, such incentive schemes might compensate selected weaknesses of an airport's strategic posture.

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    Paper provided by University of Cologne, Department of Business Policy and Logistics in its series Working Paper Series with number 107.

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    Date of creation: 2011
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    Handle: RePEc:zbw:ucdbpl:107
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    1. Warnock-Smith, David & Potter, Andrew, 2005. "An exploratory study into airport choice factors for European low-cost airlines," Journal of Air Transport Management, Elsevier, vol. 11(6), pages 388-392.
    2. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
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    5. Friedrich Gröteke & Wolfgang Kerber, 2004. "The Case of Ryanair – EU State Aid Policy on the Wrong Runway," Marburg Working Papers on Economics 200413, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
    7. Lohmann, Guilherme & Albers, Sascha & Koch, Benjamin & Pavlovich, Kathryn, 2009. "From hub to tourist destination – An explorative study of Singapore and Dubai's aviation-based transformation," Journal of Air Transport Management, Elsevier, vol. 15(5), pages 205-211.
    8. Richard K. Green, 2007. "Airports and Economic Development," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(1), pages 91-112, 03.
    9. Johannes Fuhr & Thorsten Beckers, 2008. "Contract Design, Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model," Transport Reviews, Taylor & Francis Journals, vol. 29(4), pages 459-478, September.
    10. Gillen, David, 2011. "The evolution of airport ownership and governance," Journal of Air Transport Management, Elsevier, vol. 17(1), pages 3-13.
    11. Marco Percoco, 2010. "Airport Activity and Local Development: Evidence from Italy," Urban Studies, Urban Studies Journal Limited, vol. 47(11), pages 2427-2443, October.
    12. Barbot, Cristina, 2006. "Low-cost airlines, secondary airports, and state aid: An economic assessment of the Ryanair–Charleroi Airport agreement," Journal of Air Transport Management, Elsevier, vol. 12(4), pages 197-203.
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