North American and European Aviation Markets - Case Study Example

The paper "North American and European Aviation Markets" is an outstanding example of a marketing case study. Most airports in ancient times were possessed and under the control of corporations, government branches, or public sector agencies. It was because the airfields were considered as a natural cartel that was characterized by significant cost-cutting measures, which is a principle that has now been disapproved broadly. An economic regulation argument by natural monopoly does not hold when it comes to airports (Graham 2013).

The swift growth of air traffic usually generates a capacity shortage that gives the airdrome pricing control. The leading airfields have significant market supremacy for their services. It results from the price elasticity of the airside services' demand, which is relatively small and airport charges thus account for a small portion of the total cost of an airline. It gives the airports an opportunity to increase their aeronautical fees exclusive of much loss in their traffic (Fu, Homsombat and Oum 2011).

Nonetheless, the prevailing conditions of the airports’ market rely on some factors including airline market competition and structure, the share of connecting travelers, as well as airport capacity compared to the rising demand. Another factor is intermodal competition, particularly between high-speed rail and airlines (Oum and Fu 2008). Increasing demand for privatization and commercialization has made most airports to advocate for being financially independent. They do this by entering into long-term agreements with the airlines and in turn gain by sharing the revenue by the airline (Graham 2013).

Many airlines prefer to have such relationships so that they can concentrate on the flight operations and strategize on other objectives. It is made possible by securing support from the airports. They thus both gain incentives for entering into cooperative relationships creating a win-win situation. The links may be advantageous, but the vertical relationships can as well have adverse effects.