On the competition and collaboration in a multi-airport system considering ground connection between airports

Abstract

This study examines passenger travel choices and airline decisions in a multi-airport system (MAS) with two major airports and one reliever airport. The reliever airport is connected to one major airport through ground transportation that allows cross-airport ground transfers, while the connection to the other major airport is minimal. Each airport is served by a single dominant airline. Within this stylized MAS framework, passengers have the following options: travel directly through either major airport to reach their destinations, travel to the reliever airport and then transfer to the connected major airport, or choose other alternatives, i.e., elastic demand. We model equilibrium travel choices of passengers and analyze how various system parameters affect this equilibrium. Furthermore, we investigate the airlines’ optimal pricing strategy and investment strategy for the ground connection service between the reliever and major airports, considering both non-cooperative and cooperative game frameworks, while accounting for the bargaining power dynamics among cooperating airlines. Our major findings are as follows. (i) In the cooperative game, the ratio of airlines’ payoffs and investments in ground connection improvements by the two cooperating airlines corresponds directly to the ratio of their bargaining power. (ii) Cooperation between the airlines serving the minor airport and the connected major airport yields substantial profits, especially under improved ground connection services. (iii) The greater the congestion relief provided by the minor airport and the ground connection to the major airport, the higher the additional profits and stronger competitiveness can be generated through cooperation, and the more willing the major airport is to invest in ground connection improvements.