Competitive Landscape in EU: A Passenger's Perspective

This paper aims to provide a comprehensive overview of the competitive framework in the EU air transport market from the perspective of passengers. Starting for each of the over 75,000 municipalities in Europe, we analyse the travel options for passengers to reach all European and the major intercontinental destinations. We estimate a generalized travel cost function, by considering the most relevant variables influencing passenger's choice as the ground travel options to access the origin airports and the quality of connections offered. The latter depends on the number of stops necessary to reach the final destinations, the flight time and the waiting time spent in intermediate airports, the frequency of services and the offered fare by carriers. Based on the generalized travel cost function, for each origin-destination pairs we derive the market shares both in the upstream (airport) and in the downstream (airline) market. Then, we compute a Choice Concentration Index (CCI), calculated as the HHI index of the choice options for each municipality, by employing a gravitational approach. This index represents the passenger's travel options. For a specific municipality, a 10,000 CCI index indicates that its citizens have only one possible departure airport and one airline to reach all possible destinations. The lower the index, the vaster the choices available to passengers. Finally, we correlate the CCI index with average travel times and population for all municipalities in Europe, so giving a overall picture of air transport choices and competition from a passenger's and policy maker's point of view.