Airport–airline cooperation under commercial revenue sharing agreements: A network approach

• A game-theoretic network model as an alternative to estimate the effect of airport–airline commercial revenue sharing.
• Commercial revenue sharing favors airline dominance in airports that may harm airline competition.
• Commercial revenue sharing benefits passengers as it triggers reduction of airfares.

This study analyzes airport–airline cooperation where an airport offers to share a proportion of its commercial revenue with airlines in exchange for a fixed payment. We observe the revenue share allocation that maximizes airport profit, subject to airline acceptance, and examine the effects of revenue sharing on downstream competition and social welfare. Methodologically, we employ multi-airport multi-airline non-cooperative games with a network model and find that an airport prefers to share revenue with its dominant airline in order to gain the optimal benefit.