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THE AIR TRANSPORTATION INDUSTRY Contemporary Issues in Air Transport Series Editors STEPHEN ISON LUCY BUDD Contemporary Issues in Air Transport THE AIR TRANSPORTATION INDUSTRY Economic Conflict and Competition Edited by ROSÁRIO MACÁRIO EDDY VAN DE VOORDE Elsevier Radarweg29,POBox211, 1000AEAmsterdam, Netherlands TheBoulevard,Langford Lane,Kidlington,OxfordOX5 1GB,UnitedKingdom 50HampshireStreet,5thFloor, Cambridge,MA02139,UnitedStates Copyright©2022ElsevierInc.Allrightsreserved. Nopart ofthispublicationmay bereproduced ortransmittedinanyform orbyany means, electronicormechanical, including photocopying,recording,orany informa- tionstorageandretrieval system, withoutpermissioninwritingfrom thepublisher. Details onhowtoseek permission, furtherinformation aboutthePublisher’spermis- sionspolicies andourarrangements withorganizations suchastheCopyright ClearanceCenterandtheCopyrightLicensingAgency,canbefoundatourwebsite: www.elsevier.com/permissions. Thisbookandtheindividual contributionscontainedinitareprotected under copyrightbythePublisher (otherthanasmaybenotedherein). Notices Knowledgeandbestpracticeinthisfieldareconstantlychanging. Asnew research andexperiencebroadenourunderstanding, changesinresearch methods,professional practices,ormedical treatment maybecomenecessary. Practitionersandresearchersmustalwaysrelyontheir ownexperience andknowledge inevaluating andusingany information,methods,compounds,orexperiments describedherein. Inusingsuchinformation ormethods theyshouldbemindfulof theirown safetyandthesafetyofothers,includingpartiesforwhomthey havea professionalresponsibility. Tothefullestextentofthelaw,neither thePublishernortheauthors,contributors, or editors,assume anyliabilityforanyinjury and/ordamagetopersonsorproperty asa matterofproductsliability,negligence orotherwise,or fromanyuseor operationof anymethods,products, instructions,or ideascontainedinthematerialherein. LibraryofCongressCataloging-in-Publication Data Acatalogrecord forthisbookis availablefromtheLibrary ofCongress BritishLibraryCataloguing-in-Publication Data Acataloguerecord forthisbook isavailablefromtheBritishLibrary ISBN:978-0-323-91522-9 Forinformation onallElsevierpublications visitourwebsite athttps://www.elsevier.com/books-and-journals Publisher:Joseph Hayton Acquisitions Editor: BrianRomer EditorialProjectManager:MichelleFisher ProductionProjectManager:MariaBernard CoverDesigner: MatthewLimbert TypesetbyTNQTechnologies Contents Listofcontributors xiii Preface xv 1. Economic structure of the air transport business 1 Rosário MacárioandEddy VandeVoorde 1. Introduction 1 2. Themarketstructure: highlycompetitiveandheterogeneous 2 3. Evolution towardnewbusinessmodels 15 4. Possibleconflictsituationswithin andbetweenactors 18 5. Conclusions 23 References 24 2. The burden of a ton CO ! Emission trading systems and the 2 air transport business 27 Chaouki Mustapha 1. Introduction 27 2. TheglobalchallengeofclimatechangeandCO emissions 28 2 3. Overview ofglobal policiestoaddressclimatechange 29 4. AirtransportindustrytrafficandCO emissions 30 2 5. Policiestoaddress CO emissionsfrominternationalair transport 34 2 6. Measures availabletoreduceairtransport CO emissions 35 2 7. CarbonOffsetting andReductionSchemeforInternational CivilAviation(CORSIA) 39 8. Analysis ofthesupply anddemand forcarbonoffsets forCORSIA 42 9. TheimpactofCORSIA onairtrafficandairlinefinancialresults 45 10. Conclusion 52 References 52 Furtherreading 53 3. Labor in the aviation industry: wages, disputes, and shocks 55 HeatherMcLaughlin andColmFearon 1. Introduction 55 2. Employmentintheaviationindustry 56 3. Wagedetermination 58 v vi Contents 4. Monopsony(thepower oftheemployers) 59 5. Monopoly(thepoweroftheunions) 61 6. Bargainingpower 63 7. Industrialaction 68 8. Economicshocks 71 9. Conclusions 73 References 74 4. The air transportation vertical channel, the global value added, and the role played by private versus public control 77 GianmariaMartini 1. Introduction 77 2. Theairtransportationvertical channel 79 3. Theaircraftmanufacturers 82 4. Theenginemanufacturers 84 5. Theleasingcompanies 84 6. Thehandlers 86 7. Thedistribution:GDSandothers 88 8. Airports 91 9. Airlines 93 10. Conclusions 94 References 95 5. Exogenous shocks on the air transport business: the effects of a global emergency 99 Cristiana Piccioni,Andrea StolfaandAntonio Musso 1. Introduction 99 2. ImpactofCOVID-19 ontheairlinebusinessdtheworstcrisis sinceever 100 3. Aneweraofnationalization? 112 4. Howtheindustryisgoingtofacethecrisis 117 5. Conclusions 121 References 123 Furtherreading 123 6. The impact of regulation on the airport industry: the Italian case 125 Carlo Cambiniand RaffaeleCongiu 1. Introduction 125 2. Airportregulation: aliteraturereview 126 3. Airportregulationin Italy 129 4. Theempiricalanalysis 133 Contents vii 5. Data 137 6. Empiricalresults 138 7. Conclusions 145 Appendix 146 References 148 7. Airline pricing, incumbents, and new entrants 151 Rosário MacárioandEddy VandeVoorde 1. Introduction 151 2. Pricingprinciples:theoryandliterature 152 3. Deviantbehavior: pricing asabarrier toentry 161 4. Apossible generalizationandalternativestrategies 165 5. Conclusions 167 References 168 Furtherreading 169 8. The fight for airport slots: the case of Amsterdam Airport Schiphol 171 Lisanne vanHoutenand Guillaume Burghouwt 1. Introduction 171 2. TheEUSlotRegulation 172 3. Thechanging contextforslotallocation:COVID-19andtheairport capacitycrunch 172 4. Theimplications forgrowingexcessdemand forslots: theoryand researchfindings 176 5. Theimplications forgrowingexcessdemand forslots: thecaseof AmsterdamAirportSchiphol 178 6. Conclusions 187 References 192 9. Different approaches to airport slots. Same results, same winners? 195 S.SeraCavusoglu 1. Introduction 195 2. Airportslotallocation approaches intheworldandtheproblems emerging 196 3. Discussionofthesolutionalternatives totheproblems emerged fromallocationapproaches 200 4. Proposalofanewanduntraditionalauctionmechanism forairport slotallocation 202 viii Contents 5. Analysisofairlineagents’bidding behaviorin ASAM 210 6. Casestudy:application ofASAMtoasynthetic auctionmarketof HeathrowAirport 215 7. Discussionoftheproposed modelASAMandresults 220 8. Conclusions 222 Acknowledgments 223 References 223 10. Black swans or gray rhinos on the runway? The role of uncertainty in airport strategic planning 225 Jaapde Wit 1. Introductionandresearch questions 225 2. Increasingyear-to-year trafficvolatilityatairports 226 3. High-impactshockeventsanddeepuncertainty 233 4. Absorbingrare,high-impact shockeventsinairportstrategicplanning 236 5. Finalobservationsandconclusions 242 References 242 11. Making sense of airport security in small and medium-sized airports 247 Duarte Cunha 1. Introduction 247 2. Abriefhistoryofairtransportation security 248 3. Regulatoryframework 251 4. Airtransportsecuritycosts 257 5. Proportionalityofsecurity inairports 258 6. Anewapproachforsecurity inanetworkofairports 263 7. Conclusion 269 Acknowledgments 270 References 270 12. How can airports influence airline behavior to reduce carbon footprints? 273 Vasco ReisandLaura Khammash 1. Introduction 273 2. Evolutioninairtransporttrafficandimpacts worldwide 274 3. Airportsenvironmental practiceandcarbonreductioninitiatives 278 4. Challengesinenvironmental sustainability practiceatairportsandways forward 281 5. Negotiation 286 Contents ix 6. Goodpracticerecommendations andopportunities 290 7. Conclusions 292 References 293 13. The measurement of accessibility and connectivity in air transport networks 295 Augusto Voltes-Dortaand JuanCarlosMartín 1. Introduction 295 2. Anoverviewofairtransportaccessibility 296 3. Airtransportaccessibility andrelatedconcepts 300 4. Atentativefutureresearch agenda 305 5. Conclusions 310 References 311 14. Fighting for market power: the case of Norwegian Airlines 315 Siri P.Strandenes 1. Introduction 315 2. WhydidEUderegulationinitially notaffecttheNorwegian domestic airlinemarket? 316 3. Phasesinairlinestrategicbehaviorfollowingthederegulation 318 4. Airportcompetition 324 5. Thelow-cost carrierNorwegian’scontinuedgrowth strategy 327 6. Concludingremarks 330 References 332 15. Is privatization of ATC an economic game-changer? Who gains and who loses? 335 Sven Buyle 1. Introduction 335 2. Definitions 336 3. Literaturereview 337 4. TheemergenceoftheANSPbusinessmodelanditsimpacton ATM/CNSprofits 345 5. Conclusions 357 References 358