Frontier has today published a new bulletin exploring airport market power, and how far it is affected by the degree of inter-airline competition.
It is often claimed that airports cannot have market power since most airline assets are mobile and, therefore, airlines can move their operations to other airports at any time. However, the bulletin argues that airports still have market power if passengers do not have geographically close substitutes.
However, there are two important situations in which inter-airline competition affects airport market power. First, competitive airline markets encourage new airport developments that compete with incumbents, decreasing their market power. Second, airline competition diminishes any countervailing ‘buyer power’ that may offset the effect of airport market power.
Frontier regularly advises airports, airlines and aviation regulators in the EU and beyond.
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