The impact of Airport business practices and governance forms on excess capacity

Abstract

Excess capacity poses a persistent challenge for airports as they often encounter lumpy capacity problems. The excess capacity is primarily influenced by factors such as uncertain demand, airline competition, airport pricing strategies, and the market structure of the airport industry. However, airport business practices also account for this issue. Using data from 59 U.S. airports between 2009 and 2019, we found that residual airports have less unused capacity than compensatory airports. This can be explained by the control of signatory airlines over the residual airports’ investment decisions and the lack of retained earnings under the residual agreement. We did not detect a significant difference in excess capacity between single-purpose and multipurpose governance forms. However, it is noteworthy that large hub airports exhibit higher capacity utilization compared to medium hub airports. Airports dominated by LCCs have higher capacity utilization rates, while the unused capacity remains consistent between cargo and non-cargo airports.