Airport Congestion and Inefficiency in Slot Allocation

This paper analyzes optimal slot allocation in the presence of airport congestion. We model peak and offpeak slots as vertically differentiated products, and congestion limits the number of peak slots that the airport can allocate. Inefficiency emerges when the airport does not exploit all its slots. We show that for a private airport, inefficiency may arise if the airport is not too congested and the per-passenger fee is small enough, while with a public airport it does not emerge. Furthermore the airport, irrespective of its ownership, tends to give different slots to flights with same destination if the underlying market is a duopoly, and a single slot
if the underlying market is served by a monopoly.