Modeling the effects of airline and high-speed rail cooperation on multi-airport systems: The implications on congestion, competition and social welfare

This paper investigates the effects of air and high-speed rail (HSR) cooperation on multi-airport systems (MAS). Two types of airport regimes are examined, namely profit-maximizing airports vis-à-vis welfare-maximizing airports. Stakeholders’ decisions are analyzed in a vertical structure model and benchmarked across six scenarios characterizing the relationships between airports and between airline and HSR operator, under different airport ownership and objective regimes. Extensions to incorporating airline heterogeneity and air-HSR revenue sharing are also explored. The results suggest that in the case of profit-maximizing airports, (i) the effect of airport collaboration on the profit of transfer airport is ambiguous, regardless of air-HSR cooperation or not; (ii) although the air-HSR cooperation can enhance total profit of the airport system with airport collaboration, its effect is undetermined under airport non-collaboration; (iii) although the full cooperation can lead to the highest total profit of the airport system, it may not be the best scheme in terms of social welfare; (iv) In general, an airline is more likely to provide air-HSR inter-modal service in the presence of costly hub airport congestion, low degree of substitution between direct air service and air-HSR inter-modal service, or when the competition on the direct air route is not very significant. Air-HSR cooperation offers promising improvements to the MAS, and the associated welfare benefits would be more significant with inter-airport competition, especially in the case of profit-maximizing airports. Our study highlights the importance of maintaining inter-airport competition when air-HSR service is introduced into an MAS as an alternative to direct aviation services, and explains why subsidy to such service may be justified.