Intermodal alliance and rivalry of transport chains: The air cargo market

This paper examines the effect of multimodal integration on the rivalry between two transport chains – a forwarder–airline alliance and an integrator – under the economies of traffic density. An improvement in multimodal integration by a forwarder–airline alliance would increase the alliance’s output, while reducing the integrator’s output, not only in the multimodal market but also in other markets of the cargo network. It would further increase the alliance’s profit, provided the intermodal improvement is not too costly, while reducing the integrator’s profit, and would likely improve both consumer surplus and total surplus. We also find that an alliance in general leads to greater market shares for the firms involved than outsourcing.     

The effect of code-sharing alliances on airline profitability

Code sharing and global alliances both have been increasingly adopted by airlines worldwide in recent years. A growing number of airlines, therefore, are embedded in networks of multilateral “coopetitive” (i.e., cooperative, but competitive) relationships that influence their product offering, pricing strategies, operating efficiency, market power, and their overall successes. There has been considerable research analyzing the benefits for airlines from joining global alliances, including bilateral code-sharing partnerships. However, the joint effect of code-sharing and global alliances on airline performance has not been fully investigated. In this paper, we study how the use of code-sharing strategies and their structural embeddedness into global alliances may impact airline performance. Using a unique dataset compiled from Flight Global and Airline Business's Annual Airline Alliance Report, the paper empirically investigates the joint benefits of code-sharing partnerships and global alliances on airline profitability. The results based on a group of 81 airlines during the 2007–2012 period show that the profit margin of an airline is positively associated with the number of code-sharing partners it has. Furthermore, the profit margin gains from code-sharing are greater when an airline has a higher proportion of its code-sharing partners in the same global alliance; i.e., allied code-sharing partners. Finally, we find no significant evidence that the percent of comprehensive code sharing partnerships to total partnerships has an impact on profit margin.     

Effects of cargo types and load efficiency on airline cargo revenues

Numerous factors affect air cargo revenue management. Air cargo companies base their cargo charges on whichever is the greater of gross weight or volumetric weight. We developed a cargo consolidation model based on air cargo characteristics, and investigated the effect of cargo density, the Density Ratio of Heavy cargo to Light cargo (DRHL), and the percentage of small cargo on the chargeable weights and revenues of airlines. The empirical results show that a higher DRHL indicates greater chargeable weight, and that as the DRHL climbs to a certain level, the extent of chargeable cargo weights tends to stabilize gradually. The closer the cargo density approaches the most suitable loading density for a flight, the greater the chargeable weight is. A higher proportion of small cargo loaded on an aircraft means higher airline revenue. Our results can effectively combine types of air cargo to increase loading rates and revenues for airlines.     

The potential of horizontal collaboration in airport ground freight services

Since the global economic crisis of 2007–2011, the increasingly dynamic and challenging air cargo market in Europe has forced freight forwarders to improve their performance. In addition to improving their internal transport efficiency, they have also started to look at previously unexplored opportunities for horizontal collaboration in landside airport transport. The aim of this study is to reveal the potential of air cargo transport collaboration on a horizontal level, i.e. between multiple freight forwarders within a single airport. Reviewing existing literature on horizontal collaboration, with a focus on the air cargo industry, we propose a conceptual framework for transport collaboration in the air cargo industry. Based on a comprehensive study on air cargo transport movements within Schiphol, using a simulation model based on company data of 10,747 shipments (6977 tons of cargo) for a period of 30 days, we find several interesting results. Our main finding is that horizontal collaboration can improve the transport performance, by maintaining a high frequency of transport movements and maintaining an acceptable throughput time for air cargo shipments, and at the same time reduce transport costs by up to 40%. For smaller freight forwarders, the frequency of transport deliveries can even increase, while still allowing them to improve the average load factor of transport movements.     

Investigating the effects of economies of scope on firms’ pricing behavior: Empirical evidence from the US domestic airline industry

This study investigates to what extent cross-product (belly cargo) output affects (passenger ticket) prices in the US domestic airline industry. The empirical analysis indicates that greater cargo volumes generally result in lower air fares, presumably as a result of the airlines’ realization of economies of scope. This magnitude of this price effect, however, depends on certain firm and route market characteristics. The findings of this study add to extant research on economies of scope, multi-product yield management and airline pricing and provide important insights for policy makers and airline managers alike.     

Air express network design based on express path choices – Chinese case study

Due to the shortage of cargo aircraft, Chinese express companies have to provide transportation services with a hybrid method that consists of “rented bellies and self-owned cargo aircraft”. Because the bellies are rented from air passenger companies and because the cargo aircraft are owned by the express companies, it is important for the express companies to use their cargo aircraft as effectively as possible. This paper constructs a bi-level model to optimize the flight transportation network of an express company. The upper model designs the network and allocates the transportation capacity with the objective of minimizing the total transportation cost, and the lower model calculates the link flows in user equilibrium. Data from ShunFeng (SF) Express Company (China) are used to conduct the case study. Using the model outputs, the flows on links and at nodes are analyzed to illustrate the transportation and transshipment situations.     

Towards a maturity model for big data analytics in airline network planning

The evaluation, acquisition and use of newly available big data sources has become a major strategic and organizational challenge for airline network planners. We address this challenge by developing a maturity model for big data readiness for airline network planning. The development of the maturity model is grounded in literature, expert interviews and case study research involving nine airlines. Four airline business models are represented, namely full-service carriers, low-cost airlines, scheduled charter airlines and cargo airlines. The maturity model has been well received with seven change requests in the model development phase. The revised version has been evaluated as exhaustive and useful by airline network planners. The self-assessment of airlines revealed low to medium maturity for most domains. Organizational factors show the lowest average maturity, IT architecture the highest. Full-service carriers seem to be more mature than airlines with different business models.     

A time–space network model for unit load device stock planning in international airline services

Unit load devices (pallets, containers, etc.) are used to move luggage and air cargo on wide-bodied aircraft. This paper examines a case study of the number of devices needed by an airline for international scheduled services. Unit load device movements between airports require planes to load and deliver. The stock of the unit load devices is thus influenced by the airline’s scheduled services. Based on a recurring weekly schedule, this study develops a time–space network to formulate mathematical programming models for minimizing device quantities. This model is applied to assess the preparation level of unit load devices for the various service networks for a Taiwanese airline.     

Integrators' global networks: A topology analysis with insights into the effect of the COVID-19 pandemic

In this paper we propose, to the best of our knowledge, the first analysis of the global networks of integrators FedEx, UPS, and DHL using network science. While noticing that all three networks rely on a “hub-and-spoke” structure, the network configuration of DHL leans towards a multi-“hub-and-spoke” structure that reflects the different business strategy of the integrator. We also analyzed the robustness of the networks, identified the most critical airports per integrator, and assessed that the network of DHL is the most robust according to our definition of robustness. Finally, given the unprecedented historical time that the airline industry is facing at the moment of writing, we provided some insights into how the COVID-19 pandemic affected the global capacity of integrators and other cargo airlines. Our results suggest that full-cargo airlines and, much more dramatically, combination airlines were impacted by the pandemic. On the other hand, apart from fluctuations in offered capacity due to travel bans that were quickly recovered thanks to the resilience of their networks, integrators seem to have escaped the early months of the pandemic unscathed.     

Liner ship fleet deployment with container transshipment operations

This paper proposes a liner ship fleet deployment (LSFD) problem with container transshipment operations. The proposed problem is formulated as a mixed-integer linear programming model which allows container transshipment operations at any port, any number of times, without explicitly defining the container transshipment variables. Experiments on the Asia-Europe-Oceania shipping network of a global liner shipping company show that more than one third (17-22 ports) of the total of 46 ports have transshipment throughputs. Computational studies based on randomly generated large-scale shipping networks demonstrate that the proposed model can be solved efficiently by CPLEX.     

The underlying drivers and future development of air cargo

Air cargo plays a crucial role in the air transport chain and in the globalized economy. As for other modes of transport, the demand for air cargo is a derived demand. Previous studies showed that the main determinants of air cargo demand are merchandise trade and the share of manufactures in merchandise trade. This paper aims to fill a gap in the existing literature by additionally taking the influence of air freight yields and oil prices into account when modelling the global air cargo development. Furthermore, it provides an insight into the future development of air cargo. Forecasts until 2023 are made based on a number of scenarios for the main determinants of air cargo demand. Moreover, an insight is provided into the current air cargo market, including traffic levels and different types of actors and traffic flows. The results are useful not only for academics but also for industry stakeholders for which air cargo is an important contributor to profit and/or cash levels.     

Service charge and capacity selection of an inland river port with location-dependent shipping cost and service congestion

The inland waterway transportation has attracted a lot of attention worldwide in the last fifteen years. This paper studies the location, service charge and capacity decision of an inland river port to maximize its revenue or profit. The cargo shippers are assumed to be uniformly distributed along the inland river and can be shipped to the junction port via pure road transportation service or transshipment service with the inland river port. The natural heterogeneity of the river’ navigational condition is modeled by a location-dependent waterway transportation cost and the service congestion on the port is captured by the M/M/1 queueing model. We analytically investigate the properties of the optimal solutions for various decision problems associated with the inland river port. The effects of the natural heterogeneity and port service congestion of those optimal solutions are investigated. Those theoretical results are carefully examined in the case study of the Yangtze River.     

Analysis of the recent evolution of commercial air traffic CO2 emissions and fleet utilization in the six largest national markets of the European Union

This paper presents the results of a study performed to analyze the evolution of commercial air traffic and CO₂ emissions in the European Union, from 2010 to 2013. Data sources are the European Commission's Eurostat Air Transport Statistics (Eurostat) and EUROCONTROL flight plans database. The changes in the fuel efficiency are analyzed and the potential reasons for those changes investigated. The evolution in the airline fleet composition during the last decade is presented as one of the reasons for the improvement in fuel efficiency, measured in burnt fuel per total Revenue Tonne Kilometre (RTK), as well as the different parameters depending on the airline business model (network carriers, low cost companies, etc.) and the aircraft type.Results show a slight reduction in the traffic, both for passengers and cargo (about −0.8%), and a more important reduction in CO₂ emissions (−4.3%), thanks to an improvement in the fuel efficiency parameter (−3.5%) for the three years period. There has been a relevant change in the fleet composition in the last ten years, with the replacement of older models for more efficient ones, and a shift to larger aircraft, particularly in the regional segment. Traffic has decreased in shorter distances (internal EU traffic), but increased in more efficient long range flights (extra-EU traffic), resulting also in an improvement of the efficiency parameter as average aircraft size and stage length increases.     

Price planning for time-definite less-than-truckload freight services

Price planning simultaneous determines the service demand (with associated prices) and an operational plan to maximize a carrier’s profit. We modeled this integral-constrained concave program in the link formulation and proposed an implicit enumeration embedded with Lagrangian Relaxation upper bounds to determine the optimal prices. Computations on Taiwan’s time-definite less-than-truckload freight market showed that the carrier needs to simultaneously re-evaluate its network capacity while determining prices. The common practice of distance-based pricing that sets price by a base rate over direct shipment distance underestimates operating cost, specifically operating losses for short distance shipments.     

Determinants of airport cost flexibility in a context of economic recession

The recent economic downturn led to a significant contraction in the global demand for air travel and cargo. In spite of that, airports’ operating costs did not mirror the traffic trends and kept increasing during the same period, showing evident signs of lack of flexibility. With this background, this paper aims at identifying the drivers of airport cost flexibility in a context of economic recession. This is done by estimating a short-run stochastic cost frontier over a balanced pool database of 194 airports worldwide between 2007 and 2009. Using the total change in cost efficiency during the sample period as a proxy for cost flexibility, the impact of variables such as ownership, outsourcing, airline dominance, low-cost traffic, and revenue diversification is tested in a second-stage regression. Contrary to the existing literature, a higher level of outsourcing is shown to reduce cost flexibility. Results also indicate that low-cost traffic, diversification, and corporatization increase the airports’ ability to control costs. The negative impact of airline dominance suggests the need for more stringent regulations on slot allocation at congested airports in order to ensure optimal infrastructure usage.     

An Interperiod Network Storage Location–Allocation (INSLA) model for rail distribution of ethanol biofuels

In response to the US federal renewable fuels standards, new ethanol plants of varying sizes are being established in the US. The transportation challenge is to decide on how best to move raw materials to these existing and new ethanol plants, and to ship the fuel from the ethanol plants to markets around the country. In this paper, we extend the Interperiod Network Storage Location–Allocation (INSLA) model formulation into a Rail-INSLA model to address the transportation/transshipment issues associated with the rail distribution of ethanol biofuels that include: transporting less than unit train quantities from each plant, developing new sidings at ethanol plants to accommodate a unit train, and determining the optimal number and locations for carrier operated terminals for the agglomeration of less than unit train size shipments into unit train shipments.     

Measuring the productivity changes of Chinese airlines: The impact of the entries of non-state-owned carriers

The competitive environment of the Chinese airline industry has experienced rapid change since non-state-owned airlines entered the market in 2004. We focus on measuring the productivity changes in the Chinese airlines, especially state-owned ones after this change. The results show that non-state-owned airlines are performing better than state-owned airlines. The productivity changes of state-owned airlines are mainly driven by technical changes before or after the entries of non-state-owned airlines. They have little efficiency improvement. However, the productivity changes of private airlines are mainly due to efficiency improvement. The changes associated with international joint venture cargo carrier are due to its significant improvement in both the efficiency and technical changes.     

Challenging the shipper's location problem in port studies: An analysis of French AOC wine shipments to the US

One of the major issues in port choice and hinterland studies is the identification of the inland origins of containerized shipments. Firms' headquarters, intermediary cross-docking facilities, and the real places of origin of cargo are used interchangeably. This confusion may lead to a wrong perception of the factors affecting port choice decisions. This paper proposes a solution to overcome this problem, by focusing on shipments of French AOC wines (Appellation d'Origine Contrôlée) for which the geographical origin is strictly controlled. The paper also contributes to the port choice and hinterlands literatures by testing three new variables related to the logistical organization of shipments. A conditional logit model is employed to estimate the probability of choosing a port taking in account heterogeneity in the characteristics of shipments and decision makers. The results confirm the importance of inland distance and maritime connectivity, and bring new insight on the impact of logistical organization of shipments.     

Fleet composition of commercial jet aircraft 1952–2005: Developments in uniformity and scale

The fleet composition of an airline is important in determining its costs and operational performance. This composition can be measured using numerical values. An index for measuring fleet uniformity is available, and a structured way of measuring fleet scale is introduced here. The history of all jet aircraft operated by commercial passenger or cargo airlines world-wide is analyzed both in general terms and using these measures. The analysis shows that uniformity in airline fleets has been steadily decreasing, while their scale has been steadily increasing.     

Optimal network flows for containerized imports to the United States

This paper analyzes the intermodal transportation network of containerized imports to the United States. An optimization model is developed that integrates international and North America inland transport networks. The results indicate optimal ship size, route, port, and interior shipping corridor and are highly reflective of observed shipments. Sensitivity analyzes were performed to evaluate impacts of congestion on capacity constraints as well as the prospective impacts of the alternative routes that are emerging. Results indicate that Prince Rupert is highly competitive for shipments to some markets, but the expansion of the Panama Canal would have lesser impacts on container flows.