Airport Competition the european experience potx

Airport Competition

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Airport Competition

The European Experience

Edited by

Peter Forsyth

Monash University, Australia

David Gillen

University of British Columbia, Canada

Jürgen Müller

Berlin School of Economics

Hans-Martin Niemeier

University of Applied Sciences, Germany

© Peter Forsyth, David Gillen, Jürgen Müller and Hans-Martin Niemeier 2010

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted

in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior

permission of the publisher.

Peter Forsyth, David Gillen, Jürgen Müller and Hans-Martin Niemeier have asserted their moral rights under

the Copyright, Designs and Patents Act, 1988, to be identified as the editors of this work.

Published by

Ashgate Publishing Limited Ashgate Publishing Company

Wey Court East Suite 420

Union Road 101 Cherry Street

Farnham Burlington

Surrey, GU9 7PT VT 05401-4405

England USA

www.ashgate.com

British Library Cataloguing in Publication Data

Airport competition : the European experience.

1. Airports--Economic aspects--Europe. 2. Airports--

Economic aspects--Europe--Case studies. 3. Aeronautics,

Commercial--Government policy--Europe.

I. Forsyth, P. (Peter)

387.7'36'094-dc22

ISBN: 978-0-7546-7746-8 (hbk)

ISBN: 978-0-7546-9484-7 (ebk)

Library of Congress Cataloging-in-Publication Data

Airport competition : the European experience / edited by Peter Forsyth ... [et al.].

p. cm.

Includes bibliographical references and index.

ISBN 978-0-7546-7746-8 (hardback) -- ISBN 978-0-7546-9484-7

(e-book) 1. Airports--Europe--Case studies. 2. Airports--Management--Europe--Case studies. 3. Competition-

-Europe--Case studies. I. Forsyth, P. (Peter)

HE9842.A4A37 2009

387.7'36--dc22

2009030234

Contents

List of Figures ix

List of Tables xi

Acknowledgements xiii

Editors and Contributors xv

1 Introduction and Overview 1

Peter Forsyth, David Gillen, Jürgen Müller and Hans-Martin Niemeier

Part A: How Do Airports Compete and How Strong is Competition?

2 Airport Competition and Network Access: A European Perspective   11

Dr Peter Morrell

3 Airport Entry and Exit: A European Analysis 27

Christiane Müller-Rostin, Hansjochen Ehmer, Ignaz Hannak, Plamena Ivanova,

Hans-Martin Niemeier and Jürgen Müller

4 Airport Pricing 47

Eric Pels and Erik T. Verhoef

5 Countervailing Power to Airport Monopolies 59

Kenneth Button

6 Competition Between Major and Secondary Airports: Implications for Pricing,

Regulation and Welfare 77

Peter Forsyth

7 Airport Strategies to Gain Competitive Advantage 89

Dr Anne Graham

8 An Empirical Analysis of Airport Operational Costs 103

Eric Pels, Daniel van Vuuren, Charles Ng and Piet Rietveld

9 Competition Between Airports: Occurrence and Strategy 119

Dr Michael Tretheway and Ian Kincaid

10 Airport Competition for Freight 137

Dr Michael W. Tretheway and Robert J. Andriulaitis

vi Airport Competition

Part B: Traveller Choice and Airport Competition

11 Modelling Air Travel Choice Behaviour 151

Stephane Hess

12 Airport Choice Behaviour: Findings from Three Separate Studies 177

Stephane Hess and John W. Polak

13 Improved Modelling of Competition among Airports through Flexible Form and

Non-Diagonal Demand Structures Explaining Flows Registered within a New

Traffic Accounting Matrix   197

Marc Gaudry

Part C: Case Studies of Airport Competition

14 Competition in the German Airport Market: An Empirical Investigation   239

Robert Malina

15 Competition among Airports and Overlapping Catchment Areas: An Application to

the State of Baden-Württemberg 261

Daniel Strobach

16 Airport Competition in Greece: Concentration and Structural Asymmetry 277

Andreas Papatheodorou

17 The Airport Industry in a Competitive Environment: A United Kingdom

Perspective 291

David Starkie

18 The Effect of Low-Cost Carriers on Regional Airports’ Revenue: Evidence from

the UK 311

Zheng Lei, Andreas Papatheodorou and Edith Szivas

Part D: Policy Issues

19 Competition and the London Airports: How Effective Will It Be? 321

Peter Forsyth and Hans-Martin Niemeier

20 Airport Alliances and Multi-Airport Companies: Implications for Airport

Competition 339

Peter Forsyth, Hans-Martin Niemeier and Hartmut Wolf

21 Airport Competing Terminals: Recent Developments at Dublin Airport 353

Aisling Reynolds-Feighan

22 Competition, State Aids and Low-Cost Carriers: A Legal Perspective 365

Hans Kristoferitsch

Contents vii

23 Subsidies and Competition: An Economic Perspective 379

Dan Elliott

24 Competition for Airport Services – Ground Handling Services in Europe: Case

Studies on Six Major European Hubs 393

Cornelia Templin

25 Airport Competition: Market Dominance and Abuse   413

Peter Lewisch

26 Airport Competition: A Perspective and Synthesis 427

Peter Forsyth

Airport Competition: Some Key References 437

Airport Index 439

Index 441

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List of Figures

2.1 City-pairs served by LCCs at Stansted accessible at similar prices 12

3.1 Airport entries and exits 36

3.2 Entry and exit of German airports 37

5.1 Price and output under a pure bilateral monopoly 62

5.2 Third-degree price discrimination between low-cost and legacy carriers 71

8.1 Long and short run cost curves 105

8.2 Cost as a function of the number of passengers 109

8.3 Cost as a function of the fraction of international passengers 110

8.4 Distribution of scale elasticities (PAX) over different airports 115

8.5 Distribution of scale elasticities (ATM) over different airports 115

8.6 Distribution of fixed effects over different airports   116

9.1 Percentage change in marketing staff per passenger at selected UK airports

1991–1997 120

9.2 Growth in world GDP, passenger traffic and cargo traffic   129

11.1 Main choice processes of an outbound air journey 155

11.2 Interactions between air travel choice dimensions 157

11.3 Downwards interactions between upper level choices and air travel choice

dimensions 158

11.4 Upwards interactions between air travel choice dimensions and upper level

choices 160

11.5 Structure of two-level NL model, using nesting along airport dimension 169

11.6 Structure of three-level NL model, using nesting along airport dimension

and airline dimension 171

11.7 Structure of CNL model for the joint analysis of correlation along the

airport, airline and access mode dimensions 172

13.1 Response asymmetry and non-linearity: Classical Linear-Logit vs Standard

Box-Cox-Logit 217

13.2 Fare elasticities in intercity Box-Cox Logit model 218

13.3 Travel time elasticities in intercity Box-Cox Logit model 219

13.4 Comparing Linear and Box-Cox Logit forecasts of an ICE train scenario in

Germany 222

13.5 Comparing Linear and Box-Cox Logit forecasts of intermodal train gains 222

13.6 Comparing Generalized Box-Cox and Linear Logit forecasts of intermodal

train gains 227

14.1 Spatial distribution, size and ownership structure of the German airport market   242

14.2 Spatial distribution of German and neighbouring foreign airports open to

public traffic with a runway of at least 1,000 metres length and ILS   248

15.1 Catchment area and competitive zones of Stuttgart Airport 273

15.2 Leadership position of airports in Baden-Württemberg 274

16.1 Evolution of the HHI, 1986–2005 282

x Airport Competition

16.2 GDP and passenger traffic in NUTS3 regions, 2000   284

16.3 GDP and passenger traffic in NUTS3 regions, 2000   285

16.4 Population and passenger traffic in NUTS3 regions, 2000   286

16.5 Population and passenger traffic in NUTS3 regions, 2000   286

17.1 Competition and catchment areas 300

17.2 Operating profit as a percentage of fixed assets v turnover (£000)   306

19.1 Price and quality 333

21.2 Passenger traffic and traffic growth rates at Cork, Shannon and Dublin

airports, 1995–2006 356

21.1 Regional breakdown of traffic at the three Irish state airports, 2000 and 2006   356

24.1 Major players in the ground handling industry 395

24.2 Overview of the six major European airports in the analysis 397

24.3 Ground handling companies at six major hubs in Europe 397

24.4 Shifts in market share after deregulation (1999–2004)   400

24.5 Market split at London Heathrow 2004 (turnarounds)   402

24.6 Market split at Paris Charles de Gaulle 2004 (turnarounds)   404

24.7 Market split at Frankfurt 2004 (turnarounds)   405

24.8 Market growth of Acciona at Frankfurt   405

24.9 Market split at Amsterdam Schiphol 2004 (turnarounds)   406

24.10 Market split at Madrid Barajas 2004 (turnarounds)   407

24.11 Market split at Rome Fiumicino 2004 (turnarounds)   408

25.1 Competition between airports for fuelling stops 417

25.2 Threefold structure in aviation 420

25.3 Threefold structure and vertical disintegration in ground handling 421

List of Tables

5.1 Operating margins at European airports 65

5.2 Market share of passengers by airline at Europe’s 10 largest airports (2002)   67

5.3 Market capitalizations of leading airlines ($ billions) in November 2005   67

5.4 Low-cost carriers and airports in metropolitan regions (2006) 69

8. 1 Average values of four key variables 107–108

8.2 Estimation results for a number of specifications of cost functions   112–113

8.3 Average scale elasticities in different model specifications   114

9.1 Feature presented by typical primary and secondary airports 125

10.1 Snapshot of the making of a logistics giant: Deutsche Post AG   141

10.2 Top European cargo airports 142

12.1 Summary of choice data for SF-bay area case study 179

12.2 Model performance on SF-bay area data in terms of adjusted ρ2

(0) measure 181

12.3 Trade-offs between flight frequency and access time (min/flight) in models

for combined choice of airport, airline and access mode 183

12.4 Prediction performance on SF-bay area validation data 185

12.5 Model performance on London data 187

12.6 Model results for London data 188

12.7 Prediction performance on London validation data 189

12.8 MNL trade-offs, part 1: willingness to pay ($)   193

12.9 MNL trade-offs, part 2: willingness to accept increases in access time (min) 194

13.1 Traffic accounting matrix (TAM) representation of the physical transport

network flows   200

13.2 Flow matrix for the four-city system without direct connections from

Airport J to Airport B   202

13.3 Relationship between input-output (I-O) and traffic accounting matrices (TAM)   203

13.4 Market and network analysis: a three-level approach   205

13.5 Example of full price matrix used in three-mode representative utility

function set 207

13.6 Flexible form, heteroskedasticity and spatial correlation in freight trade models   209

13.7 Flexible form, heteroskedasticity and spatial correlation in passenger

transport models 211

13.8 Selected own share elasticities of Box-Cox Logit models used in the

simulations 221

13.9 Comparing Linear with Standard and Generalized Box-Cox elasticities and

values of time 224

13.10 Linear, Standard and Generalized Logit mode choice model of freight

across the Pyrenees 225

14.1 Ownership structure of privatized German airports in spring 2008 240–240

14.2 Take-off distance required (TODR) for various aircraft with maximum take￾off weight (MTOW) and 3/4 load capacity 246

xii Airport Competition

14.3 Best substitutes and substitution coefficients for 35 German airports   252

15.1 Worldwide arrivals at selected European airports, 2004 266

15.2 Share of individual factors 268

15.3 Airports included in the study 269

15.4 Resulting scores 270

15.5 Leader and competitors 272

16.1 Results of correlation analysis 284

17.1 Selected financial and operating data for UK airports, 2005–06   293

17.2 Ownership patterns at main airports in the United Kingdom, 2007 294

17.3 UK operating bases for four non-legacy airlines, summer 2008 299

17.4 Driving times between adjacent airports (hours.minutes) 303

17.5 Financial data for the smaller UK airports, 2005–06 305

17.6 Net return (%), airports and UK private non-financial sector, 2005–06   307

18.1 Descriptive statistics 313

18.2 Impact on regional airport’s non-aeronautical revenue 314

18.3 Impact on regional airport’s aeronautical revenue 316

18.4 Impact on regional airports’ aggregate revenue 317

19.1 Overview of regulatory milestones of BAA 323

19.2 Passenger numbers at London airports (millions) 323

19.3 Regulation X-factor 324

20.1 Horizontal integration of airlines and of airports 341

20.2 Airport companies: Stakeholdings and competition   345

21.1 Key legislative and regulatory instruments governing operation of Dublin

Airport 354

21.3 Top six carriers and market shares at Dublin airport in 1996, 2000 and 2006   357

21.4 The road to Terminal 2 at Dublin Airport – key milestones   359

24.1 Third party competition per terminal 409

25.1 Threefold structure of transport markets   414

25.2 Market power in threefold structure of transport market   415

Acknowledgements

We would like to thank Achim Czerny, Karsten Fröhlich, Anne Graham, Cathal Guiomard,

Stephane Hess, Kai Hüschelrath, Jörg Last, Zheng Lei, Andreas Papatheodorou, Eric Pels, David

Starkie and Michael Tretheway for carefully reviewing chapters and providing valuable insights.

We would like to also thank Lorra Ward for providing suggestions to improve English expressions.

Furthermore, we would like to thank Harald Wiese and Fenja Fahle for preparing the index.

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