Landing Fees Research Articles

Multi-product airport competition and optimal airport charges

This paper examines the importance of commercial revenue on optimal airport charges in a Hotelling-type duopoly airports competition. Each airport offers multi-products to heterogeneous consumers (airlines and passengers) and sets commercial and landing charges and serves. The airport-airline bundle competes for leisure and business passengers. The setting of landing charges under different regulatory regimes is investigated. We demonstrate that in the leisure travel market, which ignores schedule delay cost, the optimal landing fee is invariant to the regulatory scheme, and concession revenue is determined by an airport’s home market size. In the business travel market, the optimal landing charge is smaller if concession revenue is included in setting the landing fee than if it is not included. In the former case, increasing passenger volume does not guarantee increases in airports’ aeronautical revenue, and a negative impact may exist if the weight of concession profit out of total profit is small.

Platform competition and consumer foresight: The case of airports

This paper studies the effect of competition and consumer foresight on platform profits. The focus is on airports, which provide passengers with aeronautical and commercial services through airlines and retailers. Our results can be summarized as follows. First, we unravel the relationship between consumer foresight and the optimal pricing of the two services. When passengers are myopic, they undervalue the surplus they derive from the retail services, so that the airport charges low landing fees and makes profits from the retail business. When passengers are foresighted, they better anticipate the surplus from the retail services, so that the airport changes its strategy by charging higher landing fees and boosting competition in the retail sector. Second, we find that the relationship between profits and consumer foresight strictly depends on the considered market structure. When the airport has no competitors, airport profits are non-decreasing in the degree of consumer foresight. By contrast, under duopoly competition, a weakly-negative correlation between airport profits and consumer foresight is observed. These results allow to derive two main managerial implications. First, airport competition can lead to higher landing fees. Second, under competition, an airport is not necessarily interested in informing passengers about its retail facilities. However, an extension where airports decide whether to set an advertising campaign to inform passengers about their retail facilities reveals that they end up locked in a Prisoner’s Dilemma.

Analysis of the effect of bundled airport privatization on an airline network

Depopulated regions face declines in traffic demand for airline service. The airline network in Hokkaido, Japan, plays an important role in the regional economy, healthcare, and sightseeing. Toward maintaining this airline network, the “bundled privatization” of airports has been discussed. Under such a system, several airports are privatized as a package for management by a single company. This study proposes a model for analyzing the behaviors of airport operators, airline companies, and passengers when bundled privatization is introduced to an airline network. Under bundled privatization, an airport management company can determine the landing fees of all airports such as to maximize the profits of all its airports, while an airline company can determine its service frequencies and aircraft sizes such as to maximize its profit. As a result of these two profit-maximization behaviors, an equilibrium state is obtained. The proposed model is applied to the airline network in Hokkaido, and the results of numerical calculations are discussed.

Ramsey pricing of aircraft landing fees: A case study of Iranian airports

The aim of this paper is to calculate landing fees for five uncongested airports in Iran. To this end, a Ramsey pricing model is used, with focus on domestic flights. Marginal costs for different aircraft types, namely Fokker 100, Boeing MD83, and Airbus A320 are estimated. Next, these marginal costs are used to calculate the Ramsey fees for each aircraft type in Iran. The findings of this study indicate that an increase in the length of flight increases the Ramsey landing fees. Moreover, the calculated Ramsey landing fees for the flights with length of 800 km or less are lower than the current weight-based fees; while for the flights with length of 1200 km and more the Ramsey fees are higher than the current fees. The other finding is that the Ramsey fees for A320 is always lower than that of MD83 despite the fact that A320 has a higher maximum takeoff weight than the MD83.

Platform Competition and Consumer Myopia: The Case of Airports

This paper studies the effect of competition and consumer foresight on platform profits. The focus is on airports, which provide passengers with aeronautical and commercial services through airlines and retailers. Our results can be summarized as follows. First, we unravel the relationship between consumer foresight and the optimal pricing of the two services. When passengers are myopic, the airport charges low landing fees and makes profits from the retail business. As the degree of myopia decreases, consumers value more the retail services and the airport changes its strategy by charging higher landing fees and allowing for a more competitive environment on the retail side. Second, we find that the relationship between profits and consumer foresight strictly depends on the considered market structure. When the airport has no competitors, airport profits are non-decreasing in the degree of consumer foresight. By contrast, under duopoly competition, a weakly-negative correlation between airport profits and consumer foresight is observed. These results allow to derive two main managerial implications. First, airport competition can lead to higher landing fees. Second, under competition, an airport is not necessarily interested in informing passengers about its retail facilities. However, an extension where airports decide whether to set an advertising campaign to inform passengers about their retail facilities reveals that they end up locked in a Prisoner’s Dilemma.

A three-stage competition game in an air transport network under asymmetric valuation of flight frequencies

This paper analyzes the effects of changes in aeronautical charges as brought by several airport management regimes on the air transport industry. Airlines compete on both price and non-prices variables, where connecting passengers have asymmetric valuations of flight frequencies in different legs. Changes in landing fees trigger airlines reactions on flight frequencies and airfares, whose sign depends on the weight attached to flight frequencies. Thus, an increase in the spoke landing fee leads to more international flights under low valuations of frequencies at spoke airports. Simulation exercises show that profit-maximizing aeronautical charges only at the spoke airport are preferable to those either only at the hub airport or at both airports. Welfare losses are lower when airports are granted to a unique infrastructure manager rather than to independent ones. When frequencies in the hub are highly valued, profit-maximizing charges only at the spoke airport will likely induce a welfare increase.

Dal “diritto alla città” al “diritto alla mobilità”. Spunti per una critica socio-spaziale della definizione di “turista”

In this paper, we discuss the “right to mobility”. On one side, we look at the evolution of the debate within the so-called mobility studies, on the other we look at the so-called “right to the city” invoked by Henri Lefebvre (1968). With these references, we propose a critique to the common definition of “tourist” used in statistics. This definition is constructed in opposition to the one of “other travellers”. Our hypothesis is that statistical, normative and fiscal definitions, produce discourses that performatively act on places; in so doing, they contribute in limiting the access to the urban space to migrants, seasonal workers, students and a variety of other mobile identities. We then look at the archetypical city for overtourism: Venice. We juxtapose the construction of “mobility others” in tourism statistics with the so called “landing fee” approved, but not applied yet, by Venice City Council in 2018. Consequently, we show how the debate that has followed the proposal for the fee constitutes an impasse towards a “right to the city” intersecting a “right to mobility”. In the end, we pinpoint for a couple of experiences of inclusive urban hospitality that are inclusive of diverse mobilities despite their difference.

Platform pricing and consumer foresight: The case of airports

AbstractWe analyze the optimal behavior of a platform providing essential inputs to downstream firms selling a primary and a second complementary good. Final demand is affected by consumer foresight, that is, consumers may not anticipate the ex post surplus from the secondary good when purchasing the primary good. We first set up a reduced‐form platform model and evaluate the effects of consumer foresight on the platform's optimal decisions. Then, we specialize the analysis in the context of airports, which derive revenues from both aeronautical and, increasingly, commercial activities. An airport sets landing fees and, in addition, it chooses the retail market structure by selecting the number of retail concessions to be awarded. We find that, with perfectly myopic consumers, the airport chooses to attract more passengers via low landing fees, and also sets the minimum possible number of retailers in order to increase the concessions’ revenues. However, even a very small amount of anticipation of the consumer surplus from retail activities changes significantly the airport's choices: the optimal policy is dependent on the degree of differentiation in the retail market. When consumers instead have perfect foresight, the airport establishes a very competitive retail market. This attracts passengers and it is exploited by the airport by charging higher landing fees, which then constitute the largest share of its profits. Overall, the airport's profits are maximal when consumers have perfect foresight.

An Examination of Wharf Landing Fees Legislation in Nigeria: Lagos and Cross River States Case Studies

The Wharf Landing Fees legislation has caused stirs across the states where they have been signed into law. This law empowers the Local Government Authorities in the State to charge Wharf Landing Fees on any item or consignment transported through the Seaport into any Local Government Area of the State where a Port is located. In this work, the author examines the provisions of the Wharf Landing Fees Law of Lagos State, 2009 and the Wharf Landing Fees Law of Cross River State, 2015 with the aim of ascertaining the constitutional validity or otherwise of same.The Author finds that there is no law defining what “wharf landing” means. The Author finds that Lagos State Wharf Landing Law is illegal and void as the House of Assembly of Lagos State lacked the power to enact the law at the time when same was made. The Author also finds that while House of Assembly of Cross River State had power to enact Wharf Landing Fees Law at the time when the House did, the legal instrument which gave the power is inconsistent with the provisions of the 1999 Constitution of the Federal Republic of Nigeria and therefore void. The existing Federal legislation, the Nigerian Ports Authority Act, provides that it is only the Nigerian Ports Authority that can legislate on Wharfage, Wharfinger, and landing of goods at the Ports. The State Governments do not have such power. It is recommended that if State Governments are desirous of obtaining fees from Heavy Duty vehicles that carry consignment from the Ports into the Local Governments, they are at liberty to make a law authorizing same. However, such law cannot be called “Wharf Landing Fee”. The said law must also not contain any matter on Shipping, maritime or Port Operations.

Market accessibility and hotel prices in the Caribbean: The moderating effect of quality-signaling factors

The purpose of the paper is to investigate the influence of market accessibility on hotel prices and how this influence is moderated by various quality-signaling factors, such as online user ratings, “thumbs up” (recommendation) percentage, hotel class, and chain affiliation. Using a randomized sample of hotels in the Caribbean islands, we employ a three-level mixed-effect linear regression model to investigate the plausible relationship between market accessibility and hotel prices. After controlling for unobserved island-level and hotel-level characteristics, the model indicates that in most periods, low market accessibility (high flight costs) leads to lower hotel prices, and this influence is mitigated by well-established positive reputations as represented by the quality-signaling factors. Our findings imply that hotels should work to increase their reputations to help buffer the impacts of inaccessibility. In an effort to increase market accessibility, one course of action is to reduce airport landing taxes and fees.

Factors affecting the development of hub airport clusters: focusing on the roles of low-cost carriers in the Asia-Pacific region

This paper investigates the impact of policy measures for the development of hub airport clusters on the efficiency of airports, especially focusing the role of low-cost carriers (LCCs) in the Asia-Pacific region. The policy measures evaluated in this paper are the market share of LCCs and long-distance haul, transit ratio, and landing fee, which have been adopted in most airports by the governments in the region. The results based on an unbalanced panel data set from 11 airports (groups) for the 2001–2013 period show that LCCs contribute to the operational efficiency of airports but not to their financial efficiency and that policy measures have not worked well as intended, except for reducing landing fees.

Evaluation of Intermediate Stop Operations in Long-haul Flights

Recent crises - both economic and geopolitical - and the rise of new competitors in the form of low-cost carriers and Middle East carriers have put a heavy strain on the profitability of traditional legacy airlines worldwide. Many airlines are struggling to survive and are looking for ways to cut their operational costs.Continuously increasing fuel prices further contribute to the financial difficulties, and although airlines (and aircraft manufacturers alike) have put a significant effort on reducing the operational fuel consumption, fuel still accounts for approximately 35% of airlines’ operating expenses. Therefore many airlines seek new ways to further reduce the operational costs through improved fuel efficiency.One of the less self-evident methods to potentially significantly reduce the total operational fuel consumption is the introduction of intermediate refueling stops. Previous studies have already shown that operating existing aircraft on a long-haul flight with one or two intermediate stops can lead to potential fuel savings varying from 5% to 25% by reducing the additional fuel burn on long-haul flights referred to as transport loss. On the other hand, the concept of intermediate stop operations will also affect the operational costs through higher landing fees, an increased required maintenance effort, a longer total flight time and different crew costs. As previous studies have not addressed the additional costs or benefits of intermediate stop operations, this study aims to identify the total potential of the concept.For this purpose, a software tool was developed to analyze individual long-haul origin-destination pairs to identify the optimal operation: either direct or including an intermediate stop. Within the tool crew cost, maintenance cost and local fuel prices are determined for simulated flights according to typical operating procedures. A Dijkstra's algorithm then selects the most suitable and cost-efficient airport from a large database if an intermediate stop proves a viable option for the city-pair.A number of case studies has shown that although in all cases intermediate stops proved beneficial to reduce the total fuel burn, reducing the total operating cost depended highly on city-pair specific conditions, mainly the local fuel prices, changed crew-composition and wind direction. Still, the case studies do indicate that the concept of intermediate stop operations may offer significant cost reductions for many typical long-haul flights across the world, and could prove a viable concept to gain a competitive advantage for specific airlines and routes.

The Research in Satellite Television Channel Landing Fee of China Based on PageRank Algorithm

While providing signal transmission services for stv channels (satellite television channels), catv operators in the area of broadcast and television in China raised a controversial issue about the standard of charging channel operators landing fee. To address the problem, this passage suggests a proposal about charging landing fee according to the seat value, which assessing each channel’s seat value based on the data of the audiences and the pagerank algorithm as the index. The result shows that our proposal improved the audience rating of channel while bringing a greater economic benefit to catv operators compared with the traditional standard of charging fixed landing fee.

The importance of concession revenues in the privatization of airports

We investigate the tradeoff between the airport’s concession and aeronautical revenues—two complementary services. Increasing the frequency of flights may result with congestion which could stimulate demand for concessions, but may also harm the demand for flights. When passengers have a low valuation for the concession good, the opportunity for concession revenue is small and the airport focuses its revenue on the aeronautical (i.e., landing) fees. With a sufficiently large valuation for concession goods, the airport may lower the aeronautical charges to stimulate greater flight frequency in order to lower airfares thereby attracting more passengers ultimately to increase concessions revenues. It is in the latter case where we observe minimal loss of aeronautical welfare when airports are privatized. Thus, our research could help guide decision makers in the airport privatization process. Namely, we find that privatization is not recommended unless the potential for concession revenues is sufficiently large.

Are you getting enough? Concerns about airport revenues

Many airports rely on data received from external sources to bill aeronautical charges for the use of their facilities. Billings apply to landing and terminal fees, which are intended to recover the costs associated with constructing and operating airport infrastructure, including runway systems and terminal buildings. This paper addresses the question of whether airports are ‘getting enough’ in fees for the use of their facilities. By independently observing and recording aircraft landings at a major North American airport and tracing these movements through the airport's billing system, it was observed that the data provided by outside parties to charge for the use of facilities were both incomplete and inaccurate. This means that not all revenues were collected because they were either not billed or incorrectly billed. The results of this investigation suggest that a case can be made for an airport acquiring its own system for capturing and recording aircraft movements. This will ensure correct billings for the use of airport runways and terminal buildings.

Market structure, countervailing power and price discrimination: The case of airports

A number of interesting policy questions have arisen regarding airport landing fees. For example, what is the impact of joint ownership of airports? Does airline countervailing power stop airports raising fees? Should airports be prohibited, as an EU directive intends, from charging differential input prices to airlines? We set out a model of upstream airports and downstream airlines with varying countervailing power and pricing structures. Our major findings are: (a) an increase in upstream concentration or in the degree of differentiation between airports always increases the landing fee; (b) the effect of countervailing power, via an increase in downstream concentration, lowers landing fees, but typically does not pass through to consumers; (c) with Cournot competition, uniform landing fees are always higher than discriminatory fees.

Highway toll pricing

For a tolled highway where consecutive segments allow vehicles to enter and exit unrestrictedly, we propose a simple toll pricing method. It is shown that the method is the unique method satisfying the classical axioms of Additivity and Dummy in the cost sharing literature, and the axioms of Toll Upper Bound for Local Traffic and Routing-proofness. We also show that the toll pricing method is the only method satisfying Routing-proofness Axiom and Cost Recovery Axiom. The main axiom in the characterizations is Routing-proofness which says that no vehicle can reduce its toll charges by exiting and re-entering intermediately. In the special case when there is only one unit of traffic (vehicle) for each (feasible) pair of entrance and exit, we show that our toll pricing method is the Shapley value of an associated game to the problem. In the case when there is one unit of traffic entering at each entrance but they all exit at the last exit, our toll pricing method coincides with the well-known airport landing fee solution-the Sequential Equal Contribution rule of Littlechild and Owen (1973).

Landing Fees in Portuguese Airports

How the real costs of maintenance and renewal of runways and related taxiways and aprons can be assigned to users on the basis of aircraft classification number (ACN) is analyzed, following previous work by Hogan and Starkie, who compared their results with actual fees charged in Dublin, Ireland. This paper furthers the consideration of off-peak charges per marginal induced damage costs with data from Lisbon, Porto, and Faro, Portugal, in 2009. A fairness factor is defined to assess what each aircraft type pays versus the damage it inflicts on pavements. Huge relative unfairness is highlighted under the current maximum takeoff weight fee scheme among various aircraft types at the three airports. A linear relationship between marginal cost per €1,000,000 and induced damage by each aircraft type is derived. Finally, a new and fair landing fee scheme is proposed that is based on ACN-related marginal costs. Simplifications and assumptions with regard to full cost recovery with marginal cost pricing are considered. The conclusion is that a strong case can be made for application to large and medium aircraft, but perhaps not to small aircraft.

Factors Influencing Consumer Preferences While Choosing between Budget Airlines

According to experts, the airline industry lost foothold ever since it got into a price war and relinquished its monopolistic position. And yet, it was in this scenario that budget airlines emerged. Budget airlines are an innovative business model which competes chiefly on price. They jostle with each other to provide the lowest fares by keeping their operating costs to the bare minimum. There are many ways by which airlines cut costs. Some of them are fast turnaround times leading to maximum utilization of the aircraft, using a single type of aircraft for easy maintenance, using secondary airports which have reduced landing fees, online booking of tickets saving on ticket printing costs and agent commissions, less personnel per flight, use of budget terminals which have lower costs and have least frills which allows faster boarding and deplaning, doing away with or charging for frills such as seat covers, pillows, food, entertainment, newspapers, magazines, baggage and even drinking water. Budget airlines have been an instant hit ever since Southwest airlines introduced the concept in 1973. Currently, budget airlines are thriving. A bigger part of the revenues of budget airlines are coming from ancillary sources. This also helps them keep the ticket fare competitive. They own a third of the market share in the airline industry. They have forced high end carriers such as British Airways and Qantas to ‘dress down’ and become leaner in order to stay in the market. With the entry of a number of new players in the market especially in Singapore and with rising fuel costs, budget airlines would not be able to compete on price alone for long. They have to find ways to differentiate themselves in order to stay ahead. This research intends to find out the predominant factors other than price which a consumer considers while choosing between budget airlines. Some of the factors which are being considered are Scheduling, Punctuality, Baggage capacity, Customer Service, Ease of booking tickets, Rescheduling and refund policy, Quality of food available in-flight, In-flight entertainment, Premium services such as priority boarding, seating, Ground handling services, Seating and general in-flight cleanliness etc. However, the research is not limited to these factors alone. Both primary and secondary research has been carried out. The secondary research mainly concentrates on the business model of budget airlines particularly those of the 6 budget airline based or operating out of Singapore. The airlines are Air Asia, Jetstar, Tiger Airways, Cebu Pacific, Lion Air and Air India Express. Primary research consists of questionnaire survey. The sample consists of 60 respondents. Statistical techniques have been applied to the primary data and corroborated with secondary data to gauge the important factors that influence customer’s choice of budget airline, the most preferred and the least preferred airline in Singapore and the strong points and areas of improvement of each of these airlines.

Overview of salmon stock enhancement in southeast Alaska and compatibility with maintenance of hatchery and wild stocks

Modern salmon hatcheries in Southeast Alaska were established in the 1970s when wild runs were at record low levels. Enhancement programs were designed to help rehabilitate depressed fisheries and to protect wild salmon stocks through detailed planning and permitting processes that included focused policies on genetics, pathology, and management. Hatcheries were located away from significant wild stocks, local sources were used to develop hatchery broodstocks, and juveniles are marked so management can target fisheries on hatchery fish. Initially conceived as a state-run system, the Southeast Alaska (SEAK) program has evolved into a private, non-profit concept centered around regional aquaculture associations run by fishermen and other stakeholders that pay for hatchery operations through landing fees and sale of fish. Today there are 15 production hatcheries and 2 research hatcheries in SEAK that between 2005 and 2009 released from 474 to 580 million (average 517 million) juvenile salmon per year. During this same period commercial harvest of salmon in the region ranged from 28 to 71 million salmon per year (average 49 million). Contributions of hatchery-origin fish to this harvest respectively averaged 2%, 9%, 19%, 20%, and 78% for pink, sockeye, Chinook, coho, and chum salmon. Both hatchery and wild salmon stocks throughout much of Alaska have experienced high marine survivals since the 1980s and 1990s resulting in record harvests over the past two decades. Although some interactions between hatchery salmon and wild salmon are unavoidable including increasing concerns over straying of hatchery fish into wild salmon streams, obvious adverse impacts from hatcheries on production of wild salmon populations in this region are not readily evident.