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Strings Attached?
Published in Elizabeth A. Hoppe, Ethical Issues in Aviation, 2018
When an air carrier provides new service at an airport, there are a host of costs associated with the establishment of a new ground station at an airport, including training of new personnel. Additionally, airports charge for the use of their property, including landing fees, terminal rental fees (baggage claim, ticket counter, gate, and ramp services), and federal inspection charges. Start-up costs for an air carrier can be upward of $200,000 (Martin et al. 2009). The waiving of airport landing fees and rents tends to be one of the most common forms of incentives offered by local communities because they can be administered through the airport governing body and often require little involvement from community partners. Importantly, cost waivers by themselves will not differentiate an airport seeking service, as most air carriers regard some level of cost subsidy as a requirement for entering a market. As such many airports openly advertise their landing fee incentives on their official websites. Finally, because cost waivers do not typically require substantial community involvement, they are a weak signal to air carriers of community commitment to new service.
Supply, demand, and elasticity
Published in Bijan Vasigh, Ken Fleming, Thomas Tacker, Introduction to Air Transport Economics, 2018
Bijan Vasigh, Ken Fleming, Thomas Tacker
The situation is illustrated in Figure 3.25. The supply curve is vertical because, in the short run (and usually the long run as well), airport supply is fixed. Adding runways or ramp capacity takes time and investment, and is not a decision that can be undertaken on short notice. Sometimes expansion may be impossible due to nearby development. Therefore, airport supply is fixed no matter what the price is for its services. Airport demand, on the other hand, is downward sloping, as airlines can choose whether or not to fly into an airport based on the fees to use its resources. Market equilibrium landing fee for airline traffic, P*, eliminates excessive congestion at the airport, since the price is set such that the number of planes landing at the airport closely matches its capacity. However, most airports face government regulation on the fees that they can charge. In fact, most general aviation traffic at medium or small airports in the US cannot be charged a landing fee at all, effectively subsidizing the use of airport facilities. However, assume the landing fee for the airport is set at P′, below P*. This implies that L′ takeoffs and landings will take place at the airport, which is higher than the optimal market quantity L*. The difference between L′ and L* is airport congestion – airport operations in excess of capacity capabilities. Of course, if the government were to set the landing fee at the optimal quantity of P*, it would naturally eliminate most congestion. However, P* is usually unobserved and only reached by a process of trial and error by buyer and seller. Furthermore, estimation is near impossible without market data. Mispricing is generally the outcome of price controls, which leads to congestion. Thus, the theoretical optimal landing fee for the airport is P*, determined by the supply and demand for airport resources.
Airport economic management
Published in Gert Meijer, Fundamentals of Aviation Operations, 2020
Airports charge the airline a landing fee for every landing (and take-off). This charge is based on the aircraft’s weight or seize, and often also the time of the day of that landing and the noise and pollution levels of the aircraft. Airports charge the airline also for every departing or transfer passenger. These charges form the aeronautical income of the airport and should cover the cost of producing the services, including the services required to cope with emergencies and fatalities.
Exploring the effect of airport incentive programs: the practice of Narita International Airport
Published in Transportation Planning and Technology, 2021
Jie Feng, Cheng-Lung Wu, Jinfu Zhu
Nevertheless, Narita faces challenges. Narita’s corporate nature means that it does not receive government subsidies and must be self-sufficient. Therefore, Narita has charged aircraft with a comparatively higher landing fee to recover infrastructure construction costs – aeronautical charges paid by airlines for landing and fuel taxes have been the primary revenue. Although the landing fee has been cut twice for the imminent open skies’ deregulation, Narita’s pricing level is almost double the price of Shanghai Pudong International Airport (PVG) and Inchon International Airport (ICN). This price could be an entry barrier and has been criticised by both International Air Transport Association (IATA) and airlines. In addition, resuming Haneda airport’s international air service, as initiated by the Japanese government, has sparked competition between Narita and Haneda in regard to the international aviation market (Miyoshi 2015). Narita’s location is far from metropolitan Tokyo (60 km); a shortage of domestic connections but growing new LCC services has resulted in traffic diversion to neighbouring international airports such as Korea’s Incheon Airport and Hong Kong International Airport (Miyoshi 2015). Therefore, Narita faces both opportunities and challenges, and is more motivated to launch promotional programs to stimulate development.