Substitution and complementarity in aviation: Airports vs airlines

Substitution and complementarity in aviation: Airports vs airlines

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Article ID: iaor1999787
Country: United Kingdom
Volume: 33E
Issue: 4
Start Page Number: 275
End Page Number: 286
Publication Date: Dec 1997
Journal: Transportation Research. Part E, Logistics and Transportation Review
Authors: , ,
Keywords: hub location
Abstract:

In this paper a model concerning substitution and complementarity on the linkage between airport facilities and airlines from the viewpoint of pricing policy is formulated. This model is used to analyze whether airport pricing policies, e.g. to ensure cost recovery, are compatible with competition for transfer passengers. It is found that airports with a high volume of demand can pursue cost recovery and still be the most preferred hub. Airports with a low level of demand will not be the preferred hub, even if the larger airport charges higher taxes to recover costs.

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