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Why airports can face price-elastic demands: margins, lumpiness and leveraged passenger losses

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  • David Starkie

    (Case Associated)

  • George Yarrow

    (Case Associated)

Abstract

The extent to which firms face price-elastic demands for their products is important in the application of competition law and in judgments made as to whether they have significant market power. In the context of the airport industry, assessing price-elasticities is complicated by the fact that one major type of consumer of airport services, the air passenger, is not charged directly for use of terminals and airside infrastructure. Instead, the airport derives its revenues from charges to airlines and from the supply of non-aeronautical services. The charges to airlines then become one of many input costs that the airlines recoup from passenger fares, and this intermediation has significant implications for the demand analysis.

Suggested Citation

  • David Starkie & George Yarrow, 2013. "Why airports can face price-elastic demands: margins, lumpiness and leveraged passenger losses," International Transport Forum Discussion Papers 2013/23, OECD Publishing.
    • Handle: RePEc:oec:itfaab:2013/23-en
    DOI: 10.1787/5jz40rxf0twd-en
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    Cited by:

    1. Gurtner, Gérald & Cook, Andrew & Graham, Anne & Cristóbal, Samuel, 2018. "The economic value of additional airport departure capacity," Journal of Air Transport Management, Elsevier, vol. 69(C), pages 1-14.
    2. Tolga Ülkü & Vahidin Jeleskovic & Jürgen Müller, 2014. "How scale and institutional setting explain the costs of small airports? -An application of spatial regression analysis," MAGKS Papers on Economics 201435, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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