Airport capacity choice under airport-airline vertical arrangements

Abstract

This study investigates the effects of airport-airline vertical arrangements on airport capacity choices under demand uncertainty. A multi-stage game is analyzed, in which competing airlines contribute to capacity investments and at the same time share airport revenues. Our analytical results suggest that for a profit-maximizing airport, such a vertical arrangement leads to higher capacity although its profit may not be higher. For a welfare-maximizing airport, such an arrangement has no effect on capacity or welfare. Capital cost savings brought by airportairline cooperation, if any, always leads to higher capacity, higher profit for a profit-maximizing airport, and higher welfare in the case of a welfare-maximizing airport. Numerical simulations reveal that win-win outcomes may be achieved for an airport and its airlines without government intervention.

Expanding airport capacity of cities under uncertainty: Strategies to mitigate congestion

“…If the airport might respond to this revenue decrease with a reduction of their operational or capacity holding cost, the effect on investment size would be tempered, since this response has a negative impact on the investment size. As opposed to Xiao, Fu, and Zhang (2016) who do not consider investment timing and who show that cost savings lead to larger expansion, we find cost savings leading to smaller expansion due to the timing anticipation.…”

“…In addition, the authors considered capacity and pricing as sequential instead of simultaneous decisions. Xiao, Fu, and Zhang (2016), Xiao et al (2017) incorporated airport-airline vertical arrangements and airline competition in their RO models to analyse airport capacity investment under demand uncertainty, without considering the option of flexible timing.…”

Airport route development strategy planning and performance measurement with a dynamic performance management framework

“…RD is a complicated process, and some airports have to use multiple incentives to entice airline cooperation [1,20,26]. Studies under the airport-airline arrangements context have shown the positive impacts of incentives on airport-airline collusion [27][28][29][30]. Such studies, however, cannot fully explain the increasing use of incentives for RD in the airport industry and the systematic process of RD, including the formulation, implementation, and performance estimation.…”

The Analysis of Critical Success Factors for In-Town Check-In in Taiwan

“…As a consequence of convenient and frequent international travel, more airports are reaching capacity for passenger transport, leading to severe delays and traffic congestion at airports and jeopardizing the long-term development of the aviation sector [3]. At the end of July 2013, Taoyuan International Airport Corporation (TIAC) completed its expansion of Terminal 1, which can accommodate 15 million passengers.…”