Airport capacity choice under airport-airline vertical arrangements

Yibin Xiao, Xiaowen Fu, Anming Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

35 Citations (Scopus)


This study investigates the effects of airport-airline vertical arrangements on airport capacity choices under demand uncertainty. A multi-stage game is analysed, in which competing airlines contribute to capacity investments and share airport revenues. Our analytical results suggest that for a profit-maximising airport, such a vertical arrangement leads to higher capacity but may not increase its profit, whereas for a welfare-maximising airport, such an arrangement has no effect on capacity or welfare. Capital cost savings brought by airport-airline cooperation, if any, always lead to higher capacity, and to higher profit for a profit-maximising airport and higher welfare for a welfare-maximising airport. Numerical simulations reveal that win-win outcomes may be achieved for an airport and its airlines without government intervention.

Original languageEnglish
Pages (from-to)298-309
Number of pages12
JournalTransportation Research Part A: Policy and Practice
Publication statusPublished - 1 Oct 2016
Externally publishedYes


  • Airport capacity
  • Airport-airline vertical arrangement
  • Demand uncertainty

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Transportation
  • Management Science and Operations Research


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