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

Abstract

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.