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Vertical Governance between Airlines and Airports – A Transaction Cost Analysis

Author

Listed:
  • Johannes Fuhr

    (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)

  • Thorsten Beckers

    (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)

Abstract

With airport privatization and infrastructure expansion projects taking place in the liberalized European air transport market, airport and airline companies are critically reevaluating their vertical governance structures. This paper analyzes the comparative efficiency of vertical governance structures in the airport-airline supply relationship. Using transaction cost economics as the lens of analysis, we develop propositions and present supporting qualitative case studies. Our propositions state that hub airlines and hub airports seek specialized governance structures, while value-based carriers and base airports enter into long-term contracts supported by complementary safeguards. These privately crafted governance modes complement or even replace external regulation.

Suggested Citation

  • Johannes Fuhr & Thorsten Beckers, 2006. "Vertical Governance between Airlines and Airports – A Transaction Cost Analysis," Working Papers 2006-04, Center for Network Industries and Infrastructure (CNI).
    • Handle: RePEc:cni:wpaper:2006-04
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    Cited by:

    1. Merkert, Rico & Cowie, Jonathan, 2012. "A quantitative cross-modal analysis of transportation firms’ transaction costs – Are airlines any different?," Journal of Air Transport Management, Elsevier, vol. 22(C), pages 3-8.
    2. Yu-Jwo Tao & Hsuan-Shih Lee & Chang-Shu Tu, 2021. "Analytic Hierarchy Process-Based Airport Ground Handling Equipment Purchase Decision Model," Sustainability, MDPI, vol. 13(5), pages 1-16, February.
    3. Allroggen, Florian & Malina, Robert & Lenz, Ann-Katrin, 2013. "Which factors impact on the presence of incentives for route and traffic development? Econometric evidence from European airports," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 49-61.
    4. Schmidberger, Stephan & Bals, Lydia & Hartmann, Evi & Jahns, Christopher, 2009. "Ground handling services at European hub airports: Development of a performance measurement system for benchmarking," International Journal of Production Economics, Elsevier, vol. 117(1), pages 104-116, January.
    5. Klein, Klemens & Albers, Sascha & Allroggen, Florian & Malina, Robert, 2015. "Serving vs. settling: What drives the establishment of low-cost carriers’ foreign bases?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 17-30.
    6. Kutlu, Levent & McCarthy, Patrick, 2016. "US airport ownership, efficiency, and heterogeneity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 117-132.
    7. Littlechild, Stephen C., 2012. "German airport regulation: Framework agreements, civil law and the EU Directive," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 63-75.
    8. Sismanidou, Athina & Tarradellas, Joan & Bel, Germà & Fageda, Xavier, 2013. "Estimating potential long-haul air passenger traffic in national networks containing two or more dominant cities," Journal of Transport Geography, Elsevier, vol. 26(C), pages 108-116.
    9. Chien-Wen Shen & Yen-Ting Peng & Chang-Shu Tu, 2019. "Multi-Criteria Decision-Making Techniques for Solving the Airport Ground Handling Service Equipment Vendor Selection Problem," Sustainability, MDPI, vol. 11(12), pages 1-21, June.

    More about this item

    Keywords

    vertical integration; transaction cost; airlines; airports; competition;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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