Air traffic control regulation with union bargaining in Europe 1

This paper studies the behavior of the national air traffic control (ATC) centers in the EU as it relates to bargaining between a union and government. We analyze wage formation, the reactions of ATC's to a price-cap, the slow adoption of new technologies, the reluctance to vertically disintegrate, the slow standardization, and the failures of mergers of neighboring ATC's. The theory is illustrated by using estimated union preference parameters and bargaining power parameters for the government. We find that bargaining power and union preferences vary greatly by country.