"We examine two factors that might explain the extent of air traffic delays in the United States: network benefits due to hubbing and congestion externalities. Airline hubs enable passengers to cross-connect to many destinations, thus creating network benefits that increase in the number of markets served from the hub. Delays are the equilibrium outcome of a hub airline equating high marginal benefits from hubbing with the marginal cost of delays. Congestion externalities are created when airlines do not consider that adding flights may lead to increased delays for other air carriers. In this case, delays represent a market failure. Using data on all domestic flights by major US carriers from 1988-2000, we find that delays are increasing in hubbing activity at an airport and decreasing in market concentration but the hubbing effect dominates empirically. In addition, most delays due to hubbing actually accrue to the hub carrier, primarily because the hub carrier clusters its flights in short spans of time in order to maximize passenger interconnections. Non hub flights at hub airports operate with minimal additional travel time by avoiding the congested peak connecting times of the hub carrier. These results suggest that an optimal congestion tax would have a relatively small impact on air traffic delays since hub carriers already internalize most of the costs of hubbing and a tax that did not take the network benefits of hubbing into account could reduce social welfare"--National Bureau of Economic Research web site.

This volume examines the role that airports play in economic development and land values, the regulation and economic efficiency of airports, airport pricing and competition, and the role played by airports in influencing airline operations and networks.

Excess demand for runway capacity at major airports is still causing congestion externalities and hence significant delay costs for airlines and passengers. Therefore, recent studies criticize the current administrative allocation of airport slots as both inefficient and inequitable, and propose alternatives such as a market allocation of slots or a congestion pricing solution. In perfect competition settings, theoretical models show allocation efficiency for both instruments; however, when market power prevails over the congestion externality, also adverse welfare effects may arise. The literature suggests that modern airline competition involves network structures as a dominant strategy, aiming at achieving competitive advantages based on product differentiation in order to increase market power. The corresponding network effects supposedly induce two opposing effects for passengers: additional indirect travel benefits from network density and higher mark-ups on flight fares, thus constituting the dilemma of hub concentration. However, most airport capacity allocation models consider the flights of competing airlines as perfect substitutes, so that the flight fares are determined by total industry output and do not account for product differentiation based on asymmetric network structures. Consequently, this study first provides a modified theoretical model to investigate the network hub of a dominant airline, featuring an asymmetric oligopoly with vertical product differentiation based on network density effects. Subsequently, a partial equilibrium analysis qualitatively evaluates the inefficiencies arising in the unregulated market and the welfare impact of an airport quota allocation, a secondary trading scheme, and a congestion pricing solution. In addition, a computer simulation illustrates the particular model characteristics and quantifies the inefficiencies by numeric results. The setting with congestion externalities.

In recent decades, network industries around the world have gone through periods of de- and re-regulation. With vast amounts of sometimes conflicting research carried out into specific network industries, the time has come for a critical over-arching assessment of this entire industry in order to provide a platform of understanding to aid future research and practice. This comprehensive resource provides an orientation for academics, policy makers and managers as to the main economic, regulatory and commercial challenges in the network industries. The book is split into sections covering market, policy, regulation, management perspectives, whilst all of the key network industries are covered, including energy, transport, water and telecommunications. Overseen by world-class Editors and experts in the field, this inter-disciplinary resource is essential reading for students and researchers in international business, industrial economics and the industries.

The rapid growth of the aviation industry, propelled by catalysts like Liberalization, Privatization and Globalization has in recent years given a major fillip to the global economy in terms of facilitating international trade, generating employment, foreign exchange earnings, and prosperity from tourism, industrial growth and technological development. The potential market for air transport has shown signs of a strong global resurgence, with the Asia Pacific region's performance far exceeding the world average growth&.with India and China being projected as the hottest growth sectors.The Indian aviation industry has shown impressive growth, contributing 1.0%, 8.0% and 69% share at the global, Asia Pacific and South Asian regional levels respectively. Key players such as Boeing, Airbus Industrie, ACI, IATA and ICAO envisage that India will touch 100 million passengers by 2010. Meanwhile, the Indian Government has responded suitably, inter alia by encouraging private sector participation in the development of the civil aviation sector. Over ten chapters, this informative book elucidates all the concepts fundamental to the management of air transport, illuminating the factors key to operational, infrastructural and public policy in the development of air transport.

Aviation performance is an important cog in modern globalized economies, which demand flexibility, mobility, efficiency, and dependability. Airport delays have gone from being a nuisance to being a salient public concern, drawing the ire of even the White House. In this important book, international transportation experts compare and contrast how different nations have managed their airports and air traffic control systems and how well they are meeting the needs of their people. The book's cross-national approach encompasses several different institutional arrangements, making it a timely and valuable study in comparative political economy. Among the countries studied, the United States is sometimes seen as a bastion of free markets, at the forefront of airline deregulation, but its airports and air traffic control system are publicly owned and operated. The same is true in continental Europe, for the most part. In contrast, Australia, New Zealand, the United Kingdom, and Canada are experimenting with privatization, while even mainland China is allowing the private sector to participate in airport ownership. Which methods work best, and under what circumstances? This book provides the answers.

Aviation Markets: Studies in Competition and Regulatory Reform is a collection of 17 papers selected from David Starkie's extensive writings over the last 25 years. Previously published material has been extensively edited and adapted, and combined with new material, published here for the first time. The book is divided into five sections, each featuring an original overview chapter, to better establish the background and also explain the papers' wider significance including, wherever appropriate, their relevance to current policy issues. These papers have been selected to illustrate a significant theme that has been relatively neglected thus far in both aviation and industrial economics: the role of the market and its interplay with the development of economic policy in the context of a dynamic but partly price regulated industry. The result provides a strong flavour of how market mechanisms, and particularly competition, can operate to successfully resolve policy issues. The book will be of interest to academics and those engaged in the formulation of aviation policy, such as public administrators and consultants, as well as those working in the aviation industry. It is also relevant to economic studies in a more general context, particularly to students and practitioners in industrial organisation economics, including those studying and researching the public utility industries.