Strategic formation and welfare effects of airline-high speed rail agreements

•We study the strategic formation and welfare effects of airline-HSR agreements.•Such agreements serve to sell a bundle of domestic HSR and international air services.•They increase passenger traffic and may not reduce congestion at hub airports.•We propose a two-tier test for a CP agreement to impr...

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Bibliographic Details
Published in:Transportation research. Part B: methodological 2018-11, Vol.117, p.393-411
Main Authors: Avenali, Alessandro, Bracaglia, Valentina, D'Alfonso, Tiziana, Reverberi, Pierfrancesco
Format: Article
Language:English
Subjects:
Agreements
Air transportation
Airline-high speed rail cooperation
Airlines
Airport congestion
Airports
Capacity purchase agreements
Competition policy
Cooperation
Costs
Economic models
High speed rail
Intermodal transportation
Joint venture agreements
Partnerships
Traffic congestion
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Summary:•We study the strategic formation and welfare effects of airline-HSR agreements.•Such agreements serve to sell a bundle of domestic HSR and international air services.•They increase passenger traffic and may not reduce congestion at hub airports.•We propose a two-tier test for a CP agreement to improve consumer surplus.•A JV agreement benefits consumers independent of congestion and mode substitution. Policy makers encourage airline-high speed rail (HSR) cooperation to promote intermodal passenger transport. We study the strategic formation of airline-HSR partnerships (depending on sunk costs and firms’ bargaining power) and their effects on consumer surplus and social welfare. We assume that airline-HSR agreements serve to offer a bundle of domestic HSR and international air services. In a capacity purchase (CP) agreement, the airline buys train seats to sell the bundle, whereas in a joint venture (JV) agreement firms create a distinct business unit. We find that both agreements increase traffic in the network, and thereby may not reduce congestion at hub airports. We provide antitrust authorities with a simple two-tier test for the CP agreement to improve consumer surplus. Contrary to airline-HSR mergers, the JV agreement benefits consumers independent of hub congestion and mode substitution. Simulation results show that, in case of cooperation, public agencies should prefer firms to create a JV, unless the related sunk costs are far greater than the costs of the CP agreement.
ISSN:0191-2615
1879-2367
DOI:10.1016/j.trb.2018.09.002