Over the last years, there has been increasing evidence of cooperation between airlines and high-speed rail (HSR) operators, with many intermodal agreements signed worldwide. Indeed, air transport and HSR services can be complements on long-haul routes served by connecting flights through a hub airport.
Airline-HSR agreements have received political support in Europe to promote transport intermodality, but the impact of such agreements on passengers is not clear-cut. Actually, intermodal cooperation increases product variety, but raises competition concerns since it involves coordinated pricing. One should also consider the role of congestion at hub airports, since traffic volumes in hub-and-spoke networks are affected by the airlines¿ decision on how to allocate scarce slots among markets which, in turn, depends on airport landing fees.
In this framework, the issues at stake are very important:
i) What are the main factors affecting transport operators¿ incentives to sign intermodal agreements, both on the demand side (e.g. mode substitution) and the supply side (e.g. sunk costs of cooperation)?
ii) What is the role played by relevant stakeholders, such as airport companies and the government, in facilitating or dampening such agreements?
iii) If price coordination benefits firms, are there any forms of airline-HSR cooperation (with varying degrees of integration) that improve consumer surplus and remove antitrust concerns?
iv) Are private and collective interests aligned and, if not, which policies promote intermodal agreements when desirable?
This research intends to shed light on these issues. The expected outcomes are:
i) An assessment of the benefits and costs of intermodal agreements for transport operators, airports, and passengers;
ii) An analysis of the key factors influencing transport operators¿ and airports¿ strategies, as well as market outcomes;
iii) The development of guidelines to assist policy makers in dealing with intermodal agreements.
The expected outcomes of this research are the following:
i) An assessment of the benefits and costs of different forms of intermodal agreements for transport operators, airport companies, passengers, and the transportation sector;
ii) An analysis of the most important factors (both on the demand and on the supply side) that affect transport operators¿ and airports¿ strategies (particularly, cooperation versus competition), as well as the related market outcomes;
iii) The development of guidelines to assist policy makers in dealing with intermodal agreements, so as to identify the conditions under which such agreements can be approved since they are expected to increase consumer surplus, or, alternatively, they must be subject to some limitations in order to yield welfare benefits.
Compared to the existing literature, this research has the following distinctive features:
i) it emphasizes the importance of transport operators¿ incentives to sign intermodal agreements (in their different forms), depending on the expected profits from cooperation as opposed to competition;
ii) it addresses the role of airport companies in facilitating or dampening intermodal agreements, given that airport managers can affect the market outcome by means of the landing fee that airlines have to pay to use airport slots;
iii) it focuses on the effects of intermodal agreements on consumers, thereby providing the rationale for policy makers¿ attitude toward such agreements, and introduces some practical tools that public agencies (either antitrust or regulatory authorities) may use to assess the welfare implications of such agreements.
The contribution of this research is particularly important because it provides the relevant stakeholders with some guidance in the case where transport operators and airport companies have conflicting interests in the face of intermodal agreements, and in the case where private and collective interests relative to such agreements are misaligned.
Compared to the benchmark case of competition, under cooperation transport operators¿ total profits increase with the degree of substitutability between air and HSR services (due to reduced competition), whereas the airport company¿s profit decreases (since the landing fee has to be significantly reduced to avoid a massive shift of passengers from air to HSR services). Thus, when the sunk costs are as high as transport operators would not cooperate, the airport company may find it profitable to facilitate airline-HSR cooperation, provided that mode substitution is weak.
In such a case, airport managers may decide to participate in the infrastructure investments needed to make cooperation effective. For instance, Lufthansa, Deutsche Bahn, and Fraport (the company managing Frankfurt airport) have agreed to share the costs related to deploying the luggage system for the intermodal product. On the other hand, when mode substitution is strong, the airport company may prefer to dampen airline-HSR cooperation, for instance, by influencing strategically the ease of transfer between the rail station at the airport and air terminals.
More generally, the most important obstacle to cooperation is perhaps the absence of the HSR station at the hub airport to enable passenger intermodality. Indeed, the cost of deploying the HSR link to the hub airport may be significantly (and sometimes prohibitively) high. Since the benefits of cooperation accrue to all of the involved players, then the infrastructure cost should ideally be split among the different beneficiaries. This means that the private (usually the airlines, and possibly airport companies) and the public (usually rail operators, and possibly airport companies) sectors are called to jointly take on the responsibility to make cooperation effective.
As long as intermodal agreements are beneficial to society as a whole, policy makers are also called to play an active role and pave the way for such agreements to become feasible, by providing the involved players with suitable (e.g., fiscal) incentives and/or direct funding (subject to budget constraints) to support infrastructure investments.