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Airport Management Considering the Relationship between Passenger Service Facility Charge and Airline Route Elasticity

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Document pages: 22 pages

Abstract: This study examined the effect of airport operators’ passenger service facility charge (PSFC) on airport and airline firms’ revenues, using demand and airfare functions estimated from Japanese data. In particular, it explored the relationship between PSFC and elasticity of airline routes, focusing on the Shinkansen (high-speed railway) impact. The estimation results indicated that because the airline routes competing with Shinkansen tend to have high elasticity, it would be substantially difficult for airline companies to add the PSFC to the airfares of these routes. This means that a part of the charge cannot be transferred to passengers. We found that airline firms would therefore constantly strive to avoid raising the airfare of high- elasticity routes. Also, from the estimation results, we found that suburban airports, including Narita, tend to have the high elasticity of access and egress costs.

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