[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v70y2014icp17-33.html
   My bibliography  Save this article

Airport–airline cooperation under commercial revenue sharing agreements: A network approach

Author

Listed:
  • Saraswati, Batari
  • Hanaoka, Shinya
Abstract
This study analyzes airport–airline cooperation where an airport offers to share a proportion of its commercial revenue with airlines in exchange for a fixed payment. We observe the revenue share allocation that maximizes airport profit, subject to airline acceptance, and examine the effects of revenue sharing on downstream competition and social welfare. Methodologically, we employ multi-airport multi-airline non-cooperative games with a network model and find that an airport prefers to share revenue with its dominant airline in order to gain the optimal benefit.

Suggested Citation

  • Saraswati, Batari & Hanaoka, Shinya, 2014. "Airport–airline cooperation under commercial revenue sharing agreements: A network approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 17-33.
    • Handle: RePEc:eee:transe:v:70:y:2014:i:c:p:17-33
    DOI: 10.1016/j.tre.2014.06.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554514001082
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2014.06.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Starkie, 2001. "Reforming UK Airport Regulation," Journal of Transport Economics and Policy, University of Bath, vol. 35(1), pages 119-135, January.
    2. Hsu, Chaug-Ing & Wen, Yuh-Horng, 2000. "Application of Grey theory and multiobjective programming towards airline network design," European Journal of Operational Research, Elsevier, vol. 127(1), pages 44-68, November.
    3. Barbot, Cristina & D’Alfonso, Tiziana & Malighetti, Paolo & Redondi, Renato, 2013. "Vertical collusion between airports and airlines: An empirical test for the European case," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 3-15.
    4. Starkie, David, 2012. "European airports and airlines: Evolving relationships and the regulatory implications," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 40-49.
    5. Tae H. Oum & Xiaowen Fu, 2008. "Impacts of Airports on Airline Competition: Focus on Airport Performance and Airport-Airline Vertical Relations," OECD/ITF Joint Transport Research Centre Discussion Papers 2008/17, OECD Publishing.
    6. Takebayashi, Mikio & Kanafani, Adib, 2005. "Network Competition in Air Transportation Markets: Bi-Level Approach," Research in Transportation Economics, Elsevier, vol. 13(1), pages 101-119, January.
    7. Adler, Nicole, 2001. "Competition in a deregulated air transportation market," European Journal of Operational Research, Elsevier, vol. 129(2), pages 337-345, March.
    8. Ian Jones & Ivan Viehoff & Phillipa Marks, 1993. "The economics of airport slots," Fiscal Studies, Institute for Fiscal Studies, vol. 14(4), pages 37-57, November.
    9. Wei, Wenbin & Hansen, Mark, 2007. "Airlines' competition in aircraft size and service frequency in duopoly markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(4), pages 409-424, July.
    10. Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
    11. Hsu, Chaug-Ing & Wen, Yuh-Horng, 2003. "Determining flight frequencies on an airline network with demand-supply interactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 39(6), pages 417-441, November.
    12. Hansen, Mark, 1990. "Airline competition in a hub-dominated environment: An application of noncooperative game theory," Transportation Research Part B: Methodological, Elsevier, vol. 24(1), pages 27-43, February.
    13. Basso, Leonardo J. & Zhang, Anming, 2010. "Pricing vs. slot policies when airport profits matter," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 381-391, March.
    14. Hihara, Katsuya, 2012. "An analysis of an airport–airline relationship under a risk sharing contract," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 978-992.
    15. Xiaowen Fu & Anming Zhang, 2010. "Effects of Airport Concession Revenue Sharing on Airline Competition and Social Welfare," Journal of Transport Economics and Policy, University of Bath, vol. 44(2), pages 119-138, May.
    16. Hong, Sungwook & Harker, Patrick T., 1992. "Air traffic network equilibrium: Toward frequency, price and slot priority analysis," Transportation Research Part B: Methodological, Elsevier, vol. 26(4), pages 307-323, August.
    17. Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
    18. Gregory Dobson & Phillip J. Lederer, 1993. "Airline Scheduling and Routing in a Hub-and-Spoke System," Transportation Science, INFORMS, vol. 27(3), pages 281-297, August.
    19. Barbot, Cristina, 2009. "Airport and airlines competition: Incentives for vertical collusion," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 952-965, December.
    20. D’Alfonso, Tiziana & Nastasi, Alberto, 2012. "Vertical relations in the air transport industry: A facility-rivalry game," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 993-1008.
    21. Nicole Adler, 2005. "Hub-Spoke Network Choice Under Competition with an Application to Western Europe," Transportation Science, INFORMS, vol. 39(1), pages 58-72, February.
    22. Cristina Barbot, 2011. "Vertical Contracts between Airports and Airlines Is there a Trade-off between Welfare and Competitiveness?," Journal of Transport Economics and Policy, University of Bath, vol. 45(2), pages 277-302, May.
    23. Li, Zhi-Chun & Lam, William H.K. & Wong, S.C. & Fu, Xiaowen, 2010. "Optimal route allocation in a liberalizing airline market," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 886-902, August.
    24. Fu, Xiaowen & Homsombat, Winai & Oum, Tae H., 2011. "Airport–airline vertical relationships, their effects and regulatory policy implications," Journal of Air Transport Management, Elsevier, vol. 17(6), pages 347-353.
    25. Basso, Leonardo J., 2008. "Airport deregulation: Effects on pricing and capacity," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1015-1031, July.
    26. David Starkie, 2008. "The Airport Industry in a Competitive Environment: A United Kingdom Perspective," OECD/ITF Joint Transport Research Centre Discussion Papers 2008/15, OECD Publishing.
    27. Pels, Eric, 2008. "Airline network competition: Full-service airlines, low-cost airlines and long-haul markets," Research in Transportation Economics, Elsevier, vol. 24(1), pages 68-74.
    28. Francis, Graham & Fidato, Alessandro & Humphreys, Ian, 2003. "Airport–airline interaction: the impact of low-cost carriers on two European airports," Journal of Air Transport Management, Elsevier, vol. 9(4), pages 267-273.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sheng, Dian & Li, Zhi-Chun & Xiao, Yi-bin & Fu, Xiaowen, 2015. "Slot auction in an airport network with demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 82(C), pages 79-100.
    2. Camelia Monica Gheorghe & Dorin Ivascu & Mihai Sebea & Cristina Stoenescu, 2017. "Exploring The Role Of Alliances, Agreements And Partnerships In The Airline Industry; The Case Of Apg Network Within The Romanian Market," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 161-168, August.
    3. Li, Zhi-Chun & Tu, Ningwen & Fu, Xiaowen & Sheng, Dian, 2022. "Modeling the effects of airline and high-speed rail cooperation on multi-airport systems: The implications on congestion, competition and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 155(C), pages 448-478.
    4. Xu, Fangzhou & Hanaoka, Shinya & Onishi, Masamitsu, 2019. "Multi-airport privatization in a Japanese region with trip-chain formation," Journal of Air Transport Management, Elsevier, vol. 80(C), pages 1-1.
    5. Tu, Ningwen & Li, Zhi-Chun & Fu, Xiaowen & Lei, Zheng, 2020. "Airline network competition in inter-continental market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 143(C).
    6. Mehmet Onur Olgun, 2022. "Collaborative airline revenue sharing game with grey demand data," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 30(3), pages 861-882, September.
    7. Liu, Jiaguo & Wang, Junjin, 2019. "Carrier alliance incentive analysis and coordination in a maritime transport chain based on service competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 333-355.
    8. Kumar, Patanjal & Baraiya, Rajendra & Das, Debashree & Jakhar, Suresh Kumar & Xu, Lei & Mangla, Sachin Kumar, 2021. "Social responsibility and cost-learning in dyadic supply chain coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 156(C).
    9. Gong, Daqing & Ren, Long & Liu, Shifeng & Yan, Xiaojie, 2022. "Compensation and coordination mechanisms on China's railway public transportation service," Transport Policy, Elsevier, vol. 115(C), pages 101-112.
    10. Nerja, A. & Sánchez, M., 2021. "The effects of concession revenue sharing contracts in airport competition," Economics of Transportation, Elsevier, vol. 28(C).
    11. Xu, Fangzhou & Hanaoka, Shinya, 2021. "Effects of airport terminal competition: A vertical structure approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    12. Nerja, Adrián, 2022. "Exclusivity in concession revenue sharing contracts," Journal of Air Transport Management, Elsevier, vol. 99(C).
    13. Yu, Shunan & Yang, Zhongzhen & Yu, Bin, 2017. "Air express network design based on express path choices – Chinese case study," Journal of Air Transport Management, Elsevier, vol. 61(C), pages 73-80.
    14. Shen, Ching-Cheng & Yeh, Chien-Chi & Lin, Chun-Nan, 2022. "Using the perspective of business information technology technicians to explore how information technology affects business competitive advantage," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    15. Dixit, Aasheesh & Choi, Tsan-Ming & Kumar, Patanjal & Jakhar, Suresh K., 2024. "Roles of reciprocity and fairness concerns in airline-airport systems with environmental considerations," European Journal of Operational Research, Elsevier, vol. 312(3), pages 1011-1023.
    16. Tsunoda, Yushi, 2023. "Airport concession revenue sharing and entry deterrence," Economics of Transportation, Elsevier, vol. 33(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sheng, Dian & Li, Zhi-Chun & Xiao, Yi-bin & Fu, Xiaowen, 2015. "Slot auction in an airport network with demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 82(C), pages 79-100.
    2. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2016. "Airport capacity choice under airport-airline vertical arrangements," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 298-309.
    3. Barbot, Cristina & D'Alfonso, Tiziana, 2014. "Why do contracts between airlines and airports fail?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 34-41.
    4. Tsunoda, Yushi, 2023. "Airport concession revenue sharing and entry deterrence," Economics of Transportation, Elsevier, vol. 33(C).
    5. Tu, Ningwen & Li, Zhi-Chun & Fu, Xiaowen & Lei, Zheng, 2020. "Airline network competition in inter-continental market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 143(C).
    6. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang, 2017. "Strategic entry to regional air cargo market under joint competition of demand and promised delivery time," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 317-336.
    7. Li, Zhi-Chun & Lam, William H.K. & Wong, S.C. & Fu, Xiaowen, 2010. "Optimal route allocation in a liberalizing airline market," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 886-902, August.
    8. Nerja, Adrián, 2022. "Exclusivity in concession revenue sharing contracts," Journal of Air Transport Management, Elsevier, vol. 99(C).
    9. Xiao, Yi-bin & Fu, Xiaowen & Oum, Tae H. & Yan, Jia, 2017. "Modeling airport capacity choice with real options," Transportation Research Part B: Methodological, Elsevier, vol. 100(C), pages 93-114.
    10. Choo, Yap Yin & Corbo, Leonardo & Wang, Kun, 2018. "Joint impact of airline market structure and airport ownership on airport market power and profit margin," Transport Policy, Elsevier, vol. 72(C), pages 67-78.
    11. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    12. Nerja, A. & Sánchez, M., 2021. "The effects of concession revenue sharing contracts in airport competition," Economics of Transportation, Elsevier, vol. 28(C).
    13. Choi, Jong Hae & Park, Yonghwa & Wang, Kun & Xia, Wenyi, 2020. "Whether low-cost-carrier passengers spend more on duty-free goods at the airport? Evidence from Incheon International Airport," Journal of Air Transport Management, Elsevier, vol. 86(C).
    14. Vikrant Vaze & Cynthia Barnhart, 2012. "Modeling Airline Frequency Competition for Airport Congestion Mitigation," Transportation Science, INFORMS, vol. 46(4), pages 512-535, November.
    15. D’Alfonso, Tiziana & Nastasi, Alberto, 2012. "Vertical relations in the air transport industry: A facility-rivalry game," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 993-1008.
    16. Adler, Nicole & Pels, Eric & Nash, Chris, 2010. "High-speed rail and air transport competition: Game engineering as tool for cost-benefit analysis," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 812-833, August.
    17. Adler, Nicole & Andreana, Gianmarco, 2024. "Aiding airlines for the benefit of whom? An applied game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 314(2), pages 552-564.
    18. Li, Zhi-Chun & Tu, Ningwen & Fu, Xiaowen & Sheng, Dian, 2022. "Modeling the effects of airline and high-speed rail cooperation on multi-airport systems: The implications on congestion, competition and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 155(C), pages 448-478.
    19. Zhu, Shengda & Fu, Xiaowen & Bell, Michael G.H., 2021. "Container shipping line port choice patterns in East Asia the effects of port affiliation and spatial dependence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 156(C).
    20. Wang, Chun-Han & Zhang, Wenzhu & Dai, Yue & Lee, Yu-Ching, 2022. "Frequency competition among airlines on coordinated airports network," European Journal of Operational Research, Elsevier, vol. 297(2), pages 484-495.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:70:y:2014:i:c:p:17-33. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.