How to mix per-flight and per-passenger based airport charges: The oligopoly case

- We analyze per-flight and per-passenger based charges from the carriers and the social viewpoints.
- We capture the notion of airport cost recovery and concentrate on oligopolistic airline markets.
- We find that per-passenger based airport charges can, under certain conditions, be used to implement monopoly ticket prices at slot-constrained airports.
- We further find that if carriers articulate a strong preference for per-passenger based charges, such charges can also be optimal from the social viewpoint at uncongested airports.

While airport aeronautical charges are traditionally aircraft-weight related, currently an increasing share of aeronautical airport revenues is derived from passenger related charges. This paper compares the optimal mix of per-passenger and per-flight based (cost recovering) airport charges from the carriers' and the social viewpoints when carrier markets are oligopolistic. We show that positive per-passenger charges might be able to support the implementation of monopoly fares at slot-constrained airports. They can also mitigate strategic frequency reductions at uncongested airports, leading to an increase in both carrier profit and welfare relative to a charging scheme that fully relies on per-flight charges.