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Is Mixing Airport Charges Collusive?

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Abstract: While airport aeronautical charges are traditionally aircraft weight related, currently an increasing share of aeronautical airport revenues is derived from passenger related charges. This paper compares the optimal mix of per-passenger and per-flight based (cost recovering) airport charges from the carriers and the social viewpoints when carrier markets are oligopolistic. We show that positive per-passenger charges can implement collusive fares and reduce welfare at slot-constrained airports. But, an increase in the per-passenger based charges can mitigate strategic frequency choices at uncongested airports leading to an increase in both carrier profit and welfare.

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