Airport subsidy for air-HSR intermodal service in a multi-airport system: Direct amount vs. discount

Abstract

Integrating air transport and high-speed rail (HSR) to provide air-HSR intermodal services (AHIS) can coordinate transport resources, enhance airport connectivity, and improve the environment. This paper develops a game model to investigate the optimal rates and market outcomes of airport subsidy schemes for AHIS passengers within a multi-airport system (MAS), considering monopoly and duopoly structures in the airline market as well as typical MAS governance structures (private individual, private group, and public group operations). We analyze a direct amount subsidy with a fixed amount of money and a discount subsidy dependent on AHIS prices. Our analytical findings show that, compared with no subsidy, the direct amount subsidy increases the AHIS price, AHIS traffic and total traffic, and consistently enhances consumer surplus in monopoly markets and social welfare in duopoly markets. Its positive impacts on the secondary airport's profit and the airport system's total profit are conditional on private ownership and higher secondary airport charges. In duopoly markets, when a public airport group implements subsidies, the discount subsidy yields a higher AHIS price and operator profit but reduces the secondary airport's profit compared to the direct amount subsidy, with identical effects on other outcomes. Numerical simulations and a case study of the Chengdu-Nanchong-Shanghai market suggest that the direct amount subsidy has a robust advantage in traffic growth, while the welfare implications of subsidies require careful consideration of the subsidy implementer and market circumstances. These findings provide strategic guidance for designing context-specific airport subsidy schemes to promote the development of AHIS and effective management of MAS.