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Abstract

Vertical Governance between Airlines and Airports - A Transaction Cost Analysis

The Review of Network Economics

Vol. 5, Issue 4 - December 2006, pp 386 - 412


Author
  Johannes Fuhr
Berlin University of Technology
E-mail: [email protected]

Thorsten Beckers
Berlin University of Technology

Abstract
  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.

Keywords: airports, airlines, transaction costs, governance, vertical relationship

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