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Small Market Air Service and Regional Policy

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  • James Nolan
  • Pamela Ritchie
  • John Rowcroft

Abstract

In the airline industry the longstanding importance of 'duty to serve' with respect to smaller communities is evinced by the continuation of several support programmes around the world. However, communities with existing air service increasingly view air links on other routes as a desirable commodity - especially as a means to facilitate regional and local economic growth. In this paper, various schemes to attract air service in smaller markets are examined; specifically direct subsidies, protected route packages, and guaranteed revenue approaches including the airline travel bank. Relative orders of magnitude for the direct social costs are derived using a small network simulation model and each mechanism is evaluated in terms of social welfare and underlying agency costs. © 2005 LSE and the University of Bath

Suggested Citation

  • James Nolan & Pamela Ritchie & John Rowcroft, 2005. "Small Market Air Service and Regional Policy," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 363-378, September.
    • Handle: RePEc:tpe:jtecpo:v:39:y:2005:i:3:p:363-378
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    Cited by:

    1. Wu, Hanjun & Hong Tsui, Kan Wai & Ngo, Thanh & Lin, Yi-Hsin, 2020. "Impacts of aviation subsidies on regional wellbeing: Systematic review, meta-analysis and future research directions," Transport Policy, Elsevier, vol. 99(C), pages 215-239.
    2. Kenneth Button & Junyang Yuan, 2013. "Airfreight Transport and Economic Development: An Examination of Causality," Urban Studies, Urban Studies Journal Limited, vol. 50(2), pages 329-340, February.
    3. Fageda, Xavier & Jiménez, Juan Luis & Valido, Jorge, 2016. "Does an increase in subsidies lead to changes in air fares? Empirical evidence from Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 235-242.
    4. Valido, Jorge & Pilar Socorro, M. & Hernández, Aday & Betancor, Ofelia, 2014. "Air transport subsidies for resident passengers when carriers have market power," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 388-399.
    5. Tay T. R. Koo & David Tan & David Timothy Duval, 2018. "The Effect of Levels of Air Service Availability on Inbound tourism demand from Asia to Australia," Advances in Airline Economics, in: Airline Economics in Asia, volume 7, pages 145-167, Emerald Group Publishing Limited.
    6. Francesco, Antonio Di & Pagliari, Romano, 2012. "The potential impact of removing public service obligation regulations on air fares between the Italian Mainland and the island of Sardinia," Journal of Transport Geography, Elsevier, vol. 24(C), pages 332-339.
    7. 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.
    8. Stefan Gössling & Frank Fichert & Peter Forsyth, 2017. "Subsidies in Aviation," Sustainability, MDPI, vol. 9(8), pages 1-19, July.
    9. Salesi, Vinolia Kilinaivoni & Kan Tsui, Wai Hong & Fu, Xiaowen & Gilbey, Andrew, 2022. "Stakeholder perceptions of the impacts of aviation subsidies in the South Pacific Region," Journal of Air Transport Management, Elsevier, vol. 103(C).
    10. Merkert, Rico & O’Fee, Basil, 2016. "Managerial perceptions of incentives for and barriers to competing for regional PSO air service contracts," Transport Policy, Elsevier, vol. 47(C), pages 22-33.
    11. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    12. Merkert, Rico & Williams, George, 2013. "Determinants of European PSO airline efficiency – Evidence from a semi-parametric approach," Journal of Air Transport Management, Elsevier, vol. 29(C), pages 11-16.
    13. Germá Bel & Xavier Fageda, 2011. "La reforma del modelo de gestión de aeropuertos en España: ¿Gestión conjunta o individual?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 196(1), pages 109-130, january.
    14. Merkert, Rico & O’Fee, Basil, 2013. "Efficient procurement of public air services—Lessons learned from European transport authorities' perspectives," Transport Policy, Elsevier, vol. 29(C), pages 118-125.
    15. Wittman, Michael D., 2014. "Public funding of airport incentives in the United States: The efficacy of the Small Community Air Service Development Grant program," Transport Policy, Elsevier, vol. 35(C), pages 220-228.
    16. Chen, Yilin & Hou, Meng & Wang, Kun & Yang, Hangjun, 2023. "Government interventions in regional airline markets based on aircraft size—Welfare and environmental implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 169(C).
    17. Merkert, Rico & Beck, Matthew J., 2020. "Can a strategy of integrated air-bus services create a value proposition for regional aviation management?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 527-539.
    18. Kaukin, Andrey (Каукин, Андрей), 2018. "Diagnosis of the Growth Model of the Russian Air Transportation Market: Bottlenecks and Directions of Development [Диагностика Модели Роста Российского Рынка Авиаперевозок: Узкие Места И Направлени," Working Papers 061830, Russian Presidential Academy of National Economy and Public Administration.
    19. Pita, João P. & Adler, Nicole & Antunes, António P., 2014. "Socially-oriented flight scheduling and fleet assignment model with an application to Norway," Transportation Research Part B: Methodological, Elsevier, vol. 61(C), pages 17-32.
    20. Koo, Tay T.R. & Hossein Rashidi, Taha & Park, Jin-Woo & Wu, Cheng-Lung & Tseng, Wen-Chun, 2017. "The effect of enhanced international air access on the demand for peripheral tourism destinations: Evidence from air itinerary choice behaviour of Korean visitors to Australia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 116-129.
    21. Weiwei Zhang & Lingling Jiang, 2021. "Effects of High-Speed Rail on Sustainable Development of Urban Tourism: Evidence from Discrete Choice Model of Chinese Tourists’ Preference for City Destinations," Sustainability, MDPI, vol. 13(19), pages 1-19, September.

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