Vertical Governance between Airlines and Airports - A Transaction Cost Analysis
Berlin University of Technology - Workgroup for Infrastructure Policy
affiliation not provided to SSRN
December 1, 2006
Review of Network Economics
With airport privatization and infrastructure expansion projects taking place in the liberalized European air transport market, airport and airline companies are critically reevaluating their vertical governance structures. This paper analyzes the comparative efficiency of vertical governance structures in the airport-airline supply relationship. Using transaction cost economics as the lens of analysis, we develop propositions and present supporting qualitative case studies. Our propositions state that hub airlines and hub airports seek specialized governance structures, while value-based carriers and base airports enter into long-term contracts supported by complementary safeguards. These privately crafted governance modes complement or even replace external regulation.
Number of Pages in PDF File: 27
Keywords: Transaction Costs, Vertical Integration, Privatization, Airport, Airline
JEL Classification: L93, D23, L33Accepted Paper Series
Date posted: March 19, 2009
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