Internalization of airport congestion: a network analysis

Citation

Brueckner, J.K. (2006), "Internalization of airport congestion: a network analysis", Strategic Direction, Vol. 22 No. 6. https://doi.org/10.1108/sd.2006.05622fad.004

Internalization of airport congestion: a network analysis

Internalization of airport congestion: a network analysis

Brueckner J.K. International Journal of Industrial Organization, September 2005, Vol. 23 No. 7-8, Start Page: 599, No of Pages: 16

Purpose – To develop a simple rule for setting airport congestion tolls to reflect the costs of congestion caused by a carrier. Design/methodology/approach – Develops the Brueckner (2002) rule that the airline should pay only for the congestion damage it imposes on other carriers, to account for the airline’s share of flights from that airport. Models two airlines flying between four airports, of which two form the airlines’ respective hubs. Assumes peak and off peak flights, city-pair markets with uniform demand, and the existence of business travel. Establishes a social optimum. Calculates congestion tolls for damage that is not internalized. Findings – Finds that the congestion toll paid per flight depends on the carrier’s share of flights at the congested hub airport, not on its flight share for the city pair served by the flight. Explains the importance of recognizing and charging for market power, and subsidizing for airport-level distortion. Research limitations/implications – Admits that subsidies would be impractical in practice but tolls would be an adequate second-best solution. Originality/value – Develops a new way of maximizing welfare in congested airports.ISSN: 0167-7187Reference: 35AA584

Keywords: Airports, Charging, United States of America, Aircraft