1. Marcus Vinicius Ramalho de Oliveira Alessandro V. M. Oliveira
DETERMINANTS OF THE MARKET CONCENTRATION IN THE AIR TRANSPORT SECTOR. THE RECENT PRIVATIZATION OF AIRPORTS CAUSED ANY EFFECT?
Marcus Vinicius Ramalho de Oliveira
Alessandro V. M. Oliveira
10° Simpósio de Economia dos Transportes
05/21/2015

2. Introduction
2012
2013
Fonte:
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3. Introduction

4. Introduction Economic deregulation 1990 End of SITAR
HOTRAN approval based on a criteria purely technical
ANAC, 2013

5. Introduction Economic deregulation
Demand increase
2002: 28 billion RPK
2013: 88 billion RPK
Fare reduction
2002: R$ 565,35
2013: R$ 295,46
ANAC, 2014
Concentration increased in large hubs

6. Introduction Network concentration at certain airports Localization
Political relevance
Borenstein, 1989
Big operators: barriers to the new entrants
Borenstein, 1989; Scotti, et al., 2012; Oliveira, et al., 2015

7. Introduction 2014 FIFA World Cup
Announcement: July 2006
Brazilian big blackout: october 2006 to july 2007
Increase of geographic concentration
Oliveira, et al., 2015
Increase of efficiency and airline network
Indaquate airports
Solution: Privatization of the airports

8. Research problem
What is the effect of the privatization of the airports in the concentration of Brazilian airline network?

9. Literature review Airports Acting as monopolies or oligopolies
Bel e Fageda, 2009; Bilotkach, et al., 2011
Passenger welfare is not the priority
Regulations effects
Bilotkach, et al., 2011
Europe case

10. Literature review Privatization effects Airport fees
Zhang e Zhang (2003)
High fees
Non-aeronautical revenues
Bel e Fageda (2009)
Low elasticity
Huge investments
Airlines importance
Correlation: Concentration at the airport and airport fees

11. Literature review Efeitos da privatização Efficiency
Scotti et al. (2012)
Privatized airports are less efficient
Oum et al. (2008)
Privatized airports are more efficient
Correlated with the direct competition

12. Literature review Privatization effects Concentration
Without specific literature
Evidence of correlation with airport fees, which is affected by privatization
Borenstein, 1989; Evans et al., 1993

13. Conceitual model Supply model São Paulo metropolitan region Data
Hirschman-Herfindalh Index (HHI) in the route
Market share calculated by passenger flow
São Paulo metropolitan region
Viracopos (IATA: VCP; ICAO: SBKP)
Guarulhos (IATA: GRU; ICAO: SBGR)
Congonhas (IATA: CGH; ICAO: SBSP)
Data
Observations between january 2002 and december 2013

14. Conceitual model Competitivity Attractiveness LCC Saturated airport
Oum et al., 2008
Attractiveness
Demand
Average hourly cost of the route
Bel e Fageda, 2009

15. Conceitual model Conjunctural effects Airport concentration
Financial crisis
Varig
Code share
Airport concentration
Entry barriers
Slots
Experimental variable
Dummy for privatization

16. Hypothesis
H1: The presence of competition has negatively affected the concentration on the route.
H2: The privatization negatively affected the concentration on the route.

17. Airport Average Concentration (od) Privatization effects
Conceitual model
Conjunctural effects
Competitivity
Airport Average Concentration (od) H1
Route HHI H2
Privatization effects
Demand
Attractiveness

18. Conceitual model Fincrisis fincrisis x hghdens bankrupt lcc_primary
lcc_secndry
codeshare
ln cityhhi HHI H1
lnmphhi_rpax
Model 01
Privatz
Model 02
prv_preannc
prv_announc
prv_auction
prv_control
privatz x ln cityhhi H2
ln airline_cost
ln pdew
ln geog sh
congestion

19. Conceitual model Unobservable effects Limitations Regulation
Same for all airpoirts researched
Limitations
Post privatization period
Spillover effects

20. Results Tests Cointegration and unit roots Multicollinearity
Heteroscedasticity
Autocorrelation
HAC models
Airport congestion
HAC without variable
Instrument

21. Results
Model 01
lnmphhi_rpax = β1 ln pdew + β2 ln airline_cost + β3 ln geog sh + β4 ln cityhhi + β5 privatz x ln cityhhi + δ1 codeshare + δ2 fincrisis + δ3 fincrisis x hghdens + δ4 bankrupt + δ5 lcc_secndry + δ6 lcc_primary + δ7 privatz + ε
GMM2S
Model 01
GMM2S Model 02
ln pdew ● ●
ln airline_cost ● ●
fincrisis ● ●
fincrisis x hghdens
0.0238 ●
bankrupt ● ●
lcc_secndry ● ●
lcc_primary ● ●
codeshare ● ●
ln geog sh ● ●
ln cityhhi ● ●
privatz
prv_preannc
0.0098
prv_announc
0.0113
prv_auction ●
prv_control ●
privatz x ln cityhhi ● H1
Model 02
lnmphhi_rpax = β1 ln pdew + β2 ln airline_cost + β3 ln geog sh + β4 ln cityhhi + β5 privatz x ln cityhhi + δ1 codeshare + δ2 fincrisis + δ3 fincrisis x hghdens + δ4 bankrupt + δ5 lcc_secndry + δ6 lcc_primary + δ8 prv_preannc + δ9 prv_announc + δ10 prv_auction + δ11 prv_control H2
● p < 0.01
● p < 0.05

22. Conclusions Competitivity Privatization Presence of competitivity
Codeshare
Privatization
Increase the concentration
Advantage to big operators
Actions of airport operator

23. Contributions Privatization Concentration of network Decision making
Monopoly / oligopoly
Decision making
Airport efficiency
Airport fees
Passenger welfare

24. Bibliography
A. V. M. Oliveira, G. Lohmann and T. G. Costa, "Network concentration and airport congestion in a post de- regulation context: A case study of Brazil ," Journal of Transport Geography, 2015.
A. Zhang and Y. Zhang, "Airport charges and capacity expansion: effects of concessions and privatization," Journal of Urban Economics, vol. 53, pp , 2003.
Agência Nacional de Aviação Civil - ANAC (Brazil), “Manual para Membros Consultivos HOTRAN Eletrônico”, 2013.
Agência Nacional de Aviação Civil - ANAC (Brazil), “Relatório de Tarifas Aéreas Domésticas - 3° Trimestre de 2014,” 31ª Edição, 2014.
D. Scotti, P. Malighetti, G. Martini and N. Volta, "The impact of airport competition on technical efficiency: A stochastic frontier analysis applied to Italian airport," Journal of Air Transport Management, vol. 22, pp , 2012.

25. Bibliography
G. Bel and X. Fageda, "Privatization, regulation and airport pricing: an empirical analysis for Europe," EUI Working Papers RSCAS, Florence, 2009.
S. Borenstein, "Hubs and high fares: dominance ad market power in the U.S. airline industry," The Rand Journal of Economics, vol. 20, pp , 1989.
T. H. Oum, J. Yan and C. Yu, "Ownership forms matter for airport efficiency: A stochastic frontier investigation of worldwide airports," Journal of Urban Economics, vol. 64, pp , 2008.
V. Bilotkach, J. A. Clougherty, J. Mueller and A. Zhang, "Regulation, privatization and airport charges: panel data evidence from european airports," 2011.
W. N. Evans, L. M. Froeb and G. J. Werden, "Endogeneity in the Concentration-Price Relationship: Causes, Consequences, and Cures," The Journal of Industrial Economics, vol. 41, no. 4, pp , 1993.

26. Thanks!