Competition and deregulation: Do air passengers get the benefits? |
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| Institution: | 1. Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK;2. Centre for Economic Policy, University of Hull, UK;1. Faculty of Business Administration, Osaka University of Commerce, 4-1-10 Mikuriyasakae-machi Higashiosaka, Osaka, 577-8505, Japan;2. Institute for Transport Studies, University of Leeds, Institute for Transport Studies, 34-40 University Road, University of Leeds, Leeds, LS2 9JT, UK;3. Graduate School of Maritime Sciences, Kobe University, 5-1-1, Fukaeminami-machi, Higashinada-ku, Kobe, 658-0022, Japan;1. Center for Aviation Competence (University of St. Gallen), 9 Zentrum Staldenbach, Pfaeffikon, SZ 8808, Switzerland;2. Embry-Riddle Aeronautical University, 540 Arlington Lane, Grayslake, IL 60030, United States;1. Universidade Federal do Pampa, Campus Alegrete, Alegrete, RS, Brazil;2. Universidade Federal do Rio Grande do Sul, Instituto de Matemática e Estatística, Porto Alegre, RS, Brazil;3. Universidade Federal do Rio Grande do Sul, Faculdade de Ciências Econômicas, Porto Alegre, RS, Brazil;1. Chaire de recherche aéroportuaire, Department of Economics, Université Laval, Pavillon J.-A.-DeSève 1025, avenue des Sciences-Humaines, Québec (Québec) G1V0A6, Canada;2. British Columbia Institute of Technology, Vancouver, Canada;3. University of British Columbia, Vancouver, Canada;4. School of Economic Sciences, Washington State University, Pullman, WA, USA;1. Department of Management, Information and Production Engineering, University of Bergamo, via 7 Pasubio 7b, 24044, Dalmine, BG, Italy;2. SACBO S.p.A, Via Orio al Serio 49/51, 24050, Grassobbio, BG, Italy |
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| Abstract: | It is well established that increased airline competition can produce benefits to passengers, and it is generally assumed that airport deregulation, as part of the same process of liberalisation, will produce similar benefits. But this paper shows that this may not be the case. The potential benefits to passengers from increased airline competition will in general be partially absorbed by increased airport charges at unregulated airports, and in some circumstances this may even result in increases in overall charges, not reductions. This problem is sometimes tackled by putting regulated price caps on aeronautical services, but if these are not extended to the complementary commercial services (such as retailing) which airports also provide then the adverse effects may still occur. Similarly, unilateral deregulation leading to increased airport competition in one country may just lead to the majority of the gains going abroad. Overall, the conclusion is that claims of big passenger gains from deregulation and competition may be exaggerated, and achieving these gains in reality may need subtle and quite far-reaching government intervention. |
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