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The welfare effects of the allocation of airlines to different terminals

Author

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  • Socorro, M. Pilar
  • Betancor, Ofelia

Abstract

Many airports around the world have recently built, rebuilt or are in the process of constructing new terminals. Incumbent airlines and new entrants must be allocated to the new and old facilities. When spaces at airport terminals are directly allocated, the allocation should be done by taking into account the implications for airlines' competition and social welfare, given the airlines' network configuration. We use a theoretical model in which two airlines compete in prices with differentiated products for a given network structure. The model shows that, in general, if airlines are allocated to different terminals, the level of competition is reduced, the ticket prices are higher and the consumer surplus and social welfare are lower. Only in some routes, and under certain conditions on the market size, ticket prices may be lower.

Suggested Citation

  • Socorro, M. Pilar & Betancor, Ofelia, 2010. "The welfare effects of the allocation of airlines to different terminals," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 236-248, March.
    • Handle: RePEc:eee:transe:v:46:y:2010:i:2:p:236-248
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    Citations

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    Cited by:

    1. Socorro, M. Pilar & Viecens, M. Fernanda, 2013. "The effects of airline and high speed train integration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 160-177.
    2. de Rus, Ginés & Socorro, M. Pilar, 2014. "Access pricing, infrastructure investment and intermodal competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 374-387.
    3. Wang, Kun & Xia, Wenyi & Zhang, Anming & Zhang, Qiong, 2018. "Effects of train speed on airline demand and price: Theory and empirical evidence from a natural experiment," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 99-130.
    4. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
    5. Barbot, Cristina & Betancor, Ofelia & Socorro, M. Pilar & Viecens, M. Fernanda, 2014. "Trade-offs between environmental regulation and market competition: Airlines, emission trading systems and entry deterrence," Transport Policy, Elsevier, vol. 33(C), pages 65-72.
    6. Merkert, Rico & Ploix, Boris, 2014. "The impact of terminal re-organisation on belly-hold freight operation chains at airports," Journal of Air Transport Management, Elsevier, vol. 36(C), pages 78-84.

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