Air-rail revenue sharing in a multi-airport system: Effects on traffic and social welfare

The rapid development of high-speed rail (HSR) in the past decade has greatly promoted regional connectivity by linking airports that are previously independent of each other, thus facilitating the formation of a multi-airport system (MAS). As a result, air-HSR complementarity may serve as a way to efficiently re-allocate traffic within the newly generated MAS and relieve airport congestion. This paper develops an analytical framework for a revenue sharing mechanism between an airline and an HSR operator with each retaining its own objective function. We investigate such air-HSR revenue sharing under various scenarios and show that when the HSR operator is social welfare oriented, or when the airlines are monopoly in the MAS, the revenue sharing agreement is more likely to be reached. Furthermore, airport congestion has an important implication for air-HSR revenue sharing in the sense that such cooperation is welfare-enhancing by efficiently diverting passengers from congested airports to uncongested ones. Finally, the Pareto efficient range and Pareto improvement range of revenue sharing amount are identified, and the implication for negotiations between airlines and HSR are discussed. (C) 2018 Elsevier Ltd. All rights reserved.