Ricardo Flores-Fillol

Scheduled Service Versus Personal Transportation: The Role of Distance

This paper presents a theoretical and empirical analysis of the relationship be-tween frequency of scheduled transportation services and their substitutability with personal transportation (using distance as a proxy). We study the interaction between a monopoly .rm providing a high-speed scheduled service and private transportation (i.e., car). Interestingly, the carrier chooses to increase the frequency of service on longer routes when competing with personal transportation because by providing higher frequency (at extra cost) it can also charge higher fares which can boost its pro.ts. However, in line with the results of earlier studies, frequency decreases for longer flights when driving is not a viable option. An empirical application of our analysis to the European airline industry con.rms the predictions of our theoretical model.

Technology, Business Models and Network Structure in the Airline Industry

Network airlines have been increasingly focusing their operations on hub airports through the exploitation of connecting traffic, allowing them to take advantage of economies of traffic density, which are unequivocal in the airline industry. Less attention has been devoted to airlines? decisions on point-to-point thin routes, which could be served using different aircraft technologies and different business models. This paper examines, both theoretically and empirically, the impact on airlines ?networks of the two major innovations in the airline industry in the last two decades: the regional jet technology and the low-cost business model. We show that, under certain circumstances, direct services on point-to-point thin routes can be viable and thus airlines may be interested in deviating passengers out of the hub.

Platform Pricing and Consumer Foresight: The Case of Airports

Airports have become platforms that derive revenues from both aeronautical and commercial activities. The demand for these services is characterized by a one-way complementarity in that only air travelers can purchase retail goods at the airport terminals. We analyze a model of optimal airport behavior in which this one-way complementarity is subject to consumer foresight, i.e., consumers may not anticipate in full the ex post retail surplus when purchasing a flight ticket. An airport sets landing fees, and, in addition, also chooses the retail market structure by choosing the number of retail concessions to be awarded. We find that, with perfectly myopic consumers, the airport chooses to attract more passengers via low landing fees, and also sets the minimum possible number of retailers in order to increase the concessions’ revenues, from which it obtains the largest share of profits. However, even a very small amount of anticipation of the consumer surplus from retail activities changes significantly the airport’s choices: the optimal airport policy is dependent on the degree of differentiation in the retail market. When consumers instead have perfect foresight, the airport establishes a very competitive retail market, where consumers enjoy a large surplus. This attracts passengers and it is exploited by the airport by charging higher landing fees, which then constitute the largest share of its profits. Overall, airport’s profits are maximal when consumers have perfect foresight.

Airline alliances: parallel or complementary?

This article provides a rationale for the present trend towards complementary airline alliance formation, by studying the strategic behaviour of carriers that may decide whether to form an alliance (that may be either parallel or complementary) or stay alone.

Organization of land surrounding airports

We analyze the conditions driving the organization of the territory near airports by studying the distribution of economic activities. We consider how commercial firms, service operators, and consumers compete for land. The theoretical setting identifies an aerotropolis (airport city) as a land equilibrium outcome characterized by the following spatial sequence: services area, commercial area, residential area. Using data on the distribution of establishments in the United States, we analyze the existence and determinants of aeropolitan configurations. Estimations performed with parametric methods detect some interesting dynamic patterns affecting the density and distribution of activities around selected U.S. airports. (JEL R12, R15)

Organization of Land Surrounding Airports: The Case of the Aerotropolis

We analyze the conditions driving the organization of the territory near airports by studying the distribution of economic activities. We consider how commercial firms, service operators, and consumers compete for land. The theoretical setting identifies an aerotropolis (airport city) as a land equilibrium outcome characterized by the following spatial sequence: services area, commercial area, residential area. Using data on the distribution of establishments in the United States, we analyze the existence and determinants of aeropolitan configurations. Estimations performed with parametric methods detect some interesting dynamic patterns affecting the density and distribution of activities around selected U.S. airports.

Airport Congestion and Airline Network Structure

This paper provides a theoretical and empirical analysis of the relationship between airport congestion and airline network structure. We find that the development of hub-and-spoke (HS) networks may have detrimental effects on social welfare in presence of airport congestion. The theoretical analysis shows that, although airline pro ts are typically higher under HS networks, congestion could create incentives for airlines to adopt fully-connected (FC) networks. However, the welfare analysis leads to the conclusion that airlines may have an inefficient bias towards HS networks. In line with the theoretical analysis, our empirical results show that network airlines are weakly infl uenced by congestion in their choice of frequencies from/to their hub airports. Consistently with this result, we con firm that delays are higher in hub airports controlling for concentration and airport size. Keywords: airlines; airport congestion; fully-connected networks, hub-and-spoke net- works; network efficiency JEL Classifi cation Numbers: L13; L2; L93

Platform pricing and consumer foresight: The case of airports

We analyze the optimal behavior of a platform providing essential inputs to downstream firms selling a primary and a second complementary good. Final demand is affected by consumer foresight, that is, consumers may not anticipate the ex post surplus from the secondary good when purchasing the primary good. We first set up a reduced‐form platform model and evaluate the effects of consumer foresight on the platforms optimal decisions. Then, we specialize the analysis in the context of airports, which derive revenues from both aeronautical and, increasingly, commercial activities. An airport sets landing fees and, in addition, it chooses the retail market structure by selecting the number of retail concessions to be awarded. We find that, with perfectly myopic consumers, the airport chooses to attract more passengers via low landing fees, and also sets the minimum possible number of retailers in order to increase the concessions’ revenues. However, even a very small amount of anticipation of the consumer surplus from retail activities changes significantly the airports choices: the optimal policy is dependent on the degree of differentiation in the retail market. When consumers instead have perfect foresight, the airport establishes a very competitive retail market. This attracts passengers and it is exploited by the airport by charging higher landing fees, which then constitute the largest share of its profits. Overall, the airports profits are maximal when consumers have perfect foresight.