Airport and airlines competition: Incentives for vertical collusion

Airport–airline vertical relationships, their effects and regulatory policy implications

“…Zhang et al (2010) find that when there is competition among multiple airports in a region, a dominant strategy is for airports to cooperate with their dominant carriers and thus enable themselves to compete more effectively with other airporteairline pairs. Barbot (2009b) also finds that similar incentives exist for collusion between airports and airlines, including the case in which a secondary airport and a low-cost carrier compete with the main airport and full service airlines. In short, when an airport faces competition from another airport e either an adjacent airport sharing a similar market or another hub airport competing for connecting traffic e it is in each airport's interest to form an alliance with one airline, normally the dominant carrier.…”

Dominant carrier performance and international liberalization – The case of Northeast Asia

“…Recent studies suggest that the growth of dominant airlines, and vertical arrangements with airports, affect the equilibrium of aviation markets, leading to interactive dynamics between hub carrier performance and airport development (see Barbot, 2009;Zhang et al, 2010;Fu et al, 2011;Homsombat et al, 2011;Yang et al, 2015, for example). This implies that Chinese carriers have not yet fully leveraged the market potential and domestic dominance at their hubs in order to develop international services.…”

Competition between multiproduct airports

“…11 This setting is analytically tractable and allows us to focus on the dynamics of airport competition through concession services and to draw interpretable results. Moreover, as explained in Barbot (2009), this assumption may be plausible as there are two (horizontally differentiated) transportation services available. However, when only one service is supplied, it is more likely that there are potential passengers located too distant from the airport, for whom the reservation price exceeds the total costs of flying.…”