Airport pricing and regulation under passenger demand uncertainty

This paper addresses the airport pricing and regulation issues in the presence of passenger demand uncertainty. The regulatory schemes concerned include the single-till and dual-till price-cap regulations. A vertical-structure model is presented to determine the optimal airport charges under the single-till and dual-till price-cap regulations. The effects of the airport regulatory level and the risk-averse preferences of stakeholders in the system on airport pricing are also examined. The results show that at a high passenger demand uncertainty level, the dual-till regulation would outperform the single-till regulation in terms of social welfare. However, at a low passenger demand uncertainty level, which regulation is better depends on various factors, such as the regulatory level and risk-averse preference.