Wednesday, December 03, 2008

Moscow Airports As A Paradigm for Competition?

Perry's Law: Competition breeds competence.

Exhibit A: Moscow Airports

MOSCOW -- A heated battle for passengers between the Russian capital's main airports offers an unlikely model of competition for the aviation industry.

In most cities, airports are monopolies. Even in cities that have more than one, including New York, Paris and Tokyo, airports are usually owned by the same operator. That means airlines can rarely make the kind of choices passengers take for granted, such as choosing an airport for its efficiency, shopping or lounges.

Not so in Moscow, where two international airports, Domodedovo and Sheremetyevo, owned by rival organizations, battle for business. The result is lower fees, better service and fast-improving facilities all around.

Domodedovo Airport, for example, recently convinced several top airlines to make it their Russian base, thanks to a major modernization that added more than 20 new restaurants, jewelry boutiques and a shop where passengers can rent DVDs to watch in booths. Sheremetyevo Airport responded by building a fast rail link to Moscow, complete with a Starbucks at the airport station.

Moscow's airport rivalry highlights a paradox of the global aviation industry: Airlines compete fiercely with each other for customers, but they face many monopolist suppliers, such as air-traffic control systems, fuel distributors and airports. Resulting costs and poor services get passed on to travelers.

Regulators world-wide are starting to tackle the issue -- and some see Moscow as a paradigm.


At 12/03/2008 7:43 PM, Blogger Andy said...

Maybe things have improved in the past two years, but last time I went to Moscow both their airports weren't very impressive.

At 12/03/2008 8:12 PM, Anonymous Anonymous said...

I flew into SVO on 12/28/07 and I can confirm it is a dump. FinnAir was late arriving to JFK so I ended up being rerouted on Air France. Air France Russia is horrible as well (lost both bags).

From what I understand DME is nice. I was supposed to fly into there as well. I flew out of St Petersburg (1 airport) which was very nice. I had lunch at the TGI Fridays in the terminal.

I should note that the foreign carriers do not trust Russian security screening. Finn Air has their own security screening at the gate. Their X-Ray machine looks 20 years newer and much more advanced than what the russians use.

At 12/03/2008 8:20 PM, Anonymous Anonymous said...

The rail system also seems to be very competitive in Russia. I took an overnight train to St Petersburg last winter and the first class cars are all owned/operated by different companies. The rail authority also allows vendors to sell goods on the trains before departure (they sell the right to do this). They're selling vodka and caviar mostly.

At 12/03/2008 9:31 PM, Anonymous Anonymous said...

when we had a couple of competing airlines, inter island flights in Hawaii were very competitive.

for a year or so, the one newcomer dropped prices to dirt cheap prices, their competitor tried to compete but ended up liquidating.

and the surviving dudes have subsequently raised prices heaps, brah.

At 12/03/2008 9:42 PM, Blogger Kitaro said...

X-ray screening system in Domodedovo Airport is one of the most sophisticated unlike Sheremetevo.
The last time I was in Moscow, about a year ago, I had a chance to fly from both Domodedovo and Sheremetevo.
Newly reconstructed Domodedovo was really good, all the facilities looked just great. The service level was at the top. I was really sad that big major international flights are made only through Sheremetevo, which is crap.
Maybe things have changed since then.

At 12/04/2008 2:30 AM, Anonymous Anonymous said...

I can't wait to see competing air-traffic control systems.

At 12/04/2008 2:17 PM, Blogger bobble said...

"Perry's Law: Competition breeds competence."

generally i agree with that.

but investment banking seems to be an anomaly.

At 12/04/2008 4:35 PM, Anonymous Anonymous said...

I really like the sentence "Competition breeds competence".

At 12/11/2008 5:29 PM, Anonymous Anonymous said...

Bobble is right on! (re the anomaly)

. . . Whoever thought the day would come when anyone here would look to Moscow for capitalist savvy?


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