Air transport liberalization and airport slot allocation: The case of the Northeast Asian transport market

Nicole Adler*, Xiaowen Fu, Tae H. Oum, Chunyan Yu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

67 Scopus citations

Abstract

We develop a differentiated Bertrand high speed rail and airline network game which analyzes the effects of international air transport liberalization, regional open skies policies, domestic inter-modal competition and airport slot allocation. The model is applied to the transport market in Northeast Asia using a counter-factual approach, demonstrating the model's capability of evaluating practical policies utilizing market data observed on the routes under investigation. Our modeling results suggest that air transport liberalization will benefit both consumers and the aviation industry in the region albeit not necessarily on an equal basis across or within groups. Much of the welfare gains are derived from higher frequency after liberalization, which increases service quality, hence consumer utility. Open skies policies that include pure cabotage which permit carriers to compete in the domestic markets of a foreign country, will increase competition, frequency and reduce fares below current levels. Airport slot allocation policies play an important role in the realization and distribution of potential welfare gains related to liberalization. Therefore, government agencies should implement liberalization and airport slot allocation policies jointly.

Original languageAmerican English
Pages (from-to)3-19
Number of pages17
JournalTransportation Research Part A: Policy and Practice
Volume62
DOIs
StatePublished - Apr 2014

Bibliographical note

Funding Information:
The authors gratefully acknowledge the research fund support of the Climate Change and Intercity Transport Project Fund set up by JR-Central of Japan for the initial stage of this research. Tae Oum acknowledges the Research Grant Support of the Social Science and Humanities Research of Canada. Financial support from the Hong Kong RGC General Research Fund (PolyU 5430/11H) and the Recanati Fund are also gratefully acknowledged. Nicole Adler would like to thank Avigail Lithwick for excellent research assistance. Finally, we would like to thank the editor of this special issue and two anonymous referees that have helped us to improve this paper by focusing on the policy outcomes.

Keywords

  • Airlines
  • Competition
  • High-speed rail
  • Network game
  • North East Asia
  • Slot allocation

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