The market size of a city-pair route at an airport

Abstract

A model is developed for estimating the size of the market for a city-pair route at an airport from both the demand and supply sides of air transportation. The average airport access cost, average passenger delay cost, and average airline operating cost all either increase or decrease with an increase in the market size of a city-pair route at an airport, so the optimum market size can be determined from trade-offs among these costs. A nonlinear mathematical programming problem is formulated to determine the optimal number of passengers, the local service area of a city-pair market and to perform sensitivity analyses. The results show that long-haul services ought to be concentrated in one large airport, while short-haul services might be dispersed among many small airports. Improvements in the technology of the airport access mode or increases in the average income of the cities served can expand the market size and service area, but at a declining expansion rate. In metropolitan areas with high population density, airlines can operate more efficiently and distribute air services among more airports. City-pair markets with stable passenger demand, or markets served by airlines with efficient scheduling technology are shown to exhibit high cost efficiencies.