Which is a stronger competitor,High Speed Rail,or Low Cost Carrier,to Full Service Carrier? – Effects of HSR network extension and LCC entry on FSC's airfare in Japan

In Japan, High Speed Rail (HSR) extended its network in 2011 and 2015, and Low Cost Carriers (LCC) entered into the domestic airline market in 2012. We compared the effects of the extension of the HSR network and the entry of LCCs on the airfares of the incumbent Full Service Carriers (FSC). We conducted Difference in Differences analysis with passenger level data to evaluate these market changes, and found that the effects of the HSR extension on FSC's airfares were consistently negative and larger in the short haul markets, while the effects of the entry of LCCs were inconsistent. HSR seems to be a stronger competitor than LCC to FSC and this finding could be affected by capacity, which is large for HSR while small for the LCCs.     

The impact of Air Service Agreement liberalisation: The case of Nigeria

The positive impact of air transport liberalisation as suggested by economic theories and empirical studies has inspired many developing countries like Nigeria to liberalise some of its Air Service Agreements (ASAs). This paper seeks to examine the extent to which international air service liberalisation has impacted upon Nigeria ten years after it was introduced. The research developed a cross-sectional model with passenger traffic as the dependent variable, while macroeconomic factors (trade and GDP), historical links, distance and ASAs (a proxy for liberalisation) served as independent or predictor variables. The analysis revealed a set of ASA stages in the country's policy-making process (restricted Bilateral Air Service Agreement, Open Skies Agreement and Yamoussoukro Declaration). Further analysis showed that the predictor variables were all significant in explaining passenger demand. The model demonstrated that the liberalisation of market access to the Open Skies Agreement level could stimulate traffic growth by at least 65 percent. The findings can assist in guiding policy and industry stakeholders in future decisions relating to liberalisation and ASAs.     

Economic contribution of essential air service flights on small and remote communities

The Essential Air Service Program (EAS) has attracted considerable criticism and has been a target for either modification or complete termination almost since its inception through the Airline Deregulation Act in 1978. Although its opponents emphasize the program's inefficiency, its supporters claim that the program is crucial to accessing small and remote communities, which helps them develop economically and socially. This paper demonstrates the economic contributions of EAS flights to small and remote communities. Using a two-stage least squares estimation, the major findings indicate that a 1% increase in air passenger traffic in EAS airports with a minimum annual air passenger traffic of 1000 likely leads to a 0.12% increase in per capita income of the community served by that airport. Our results also suggest that EAS communities that are able to sustain their subsidized flights experienced higher per capita income growth in the 1999–2011 period than did ex-EAS communities that lost their flights as a result of non-eligibility.     

Text mining approach to explore dimensions of airline customer satisfaction using online customer reviews

The airline industry operates in a highly competitive market, in which achieving and maintaining a high level of passenger satisfaction is seen as a key competitive advantage. This study presents a novel framework for measuring customer satisfaction in the airline industry. Using text mining methods we explore Online Customer Reviews (OCRs) to provide guidelines for airlines companies to improve in competitiveness. We analyze a database of more than 55,000 OCRs, covering over 400 airlines and passengers from 170 countries. Using a Latent Dirichlet Allocation model we identified 27 dimensions of satisfaction described by 882 adjectives. Dimensions and adjectives were used to predict airline recommendation by customers, resulting in an accuracy of 79.95%. The most relevant dimensions for airlines' recommendation prediction were calculated. OCRs were stratified according to several variables. Of those, type of passenger impacted the least on the number of dimensions of customer satisfaction, while type of cabin flown impacted the most. Observing results in different publication years we showed airline customer trends through time. Our method showed sensitiveness to identify variations in dimensions distribution according to different passenger characteristics and preferences. Practical implications are that airline service providers aiming at maximizing customer satisfaction should focus their efforts on (i) customer service to first class passengers, (ii) comfort to premium economy passengers, and (iii) checking luggage and waiting time to economy class travelers. Regression analysis revealed cabin staff, onboard service and value for money as top three dimensions of satisfaction to predict the recommendation of airlines. Designing services that excel in those dimensions is likely to improve the company's performance with customers.     

Model of passenger behavior choice under flight delay based on dynamic reference point

Flight delay has always been a concern of scholars, but in previous studies, there has been little discussion of passenger behavior choice after flight delay. The paper based on the prospect theory, taking the Beijing-Shanghai route as an example, constructs the passenger behavior choice model under flight delay, and in order to explore the decision-making behavior of passengers with different attributes under different delay scenarios. The results show that the reference point of passengers' behavioral decision-making is dynamic due to different delay scenarios and passengers' attributes. For the same reason, passengers have different behavioral choices when encountering flight delay. Through empirical analysis, it is found that the choice of passengers based on prospect theory is in line with the actual choice of passengers. The choice model proposed in the paper can effectively describe the passenger's choice behavior.     

Financial distress,survival network design strategies,and airline pricing: An event study of a merger between a bankrupt FSC and an LCC in Brazil

This paper develops an event study to investigate the airfare effects of the bankruptcy of a financially distressed full-service carrier (FSC) and its subsequent acquisition by a low-cost carrier (LCC) in Brazil. We account for the distressed carrier's survival network design strategies (SNDS) pursued during its reorganization—a suspected source of sample selection bias. Additionally, as rivals' pricing could be aimed at driving the distressed/bankrupt carrier out of the market, we treat the carrier's distress as endogenously determined with it. Our results do not uncover any survival pricing behavior stemming from SNDS, but reveal fiercer price competition from rivals in periods preceding both the distressed carrier's bankruptcy filing and acquisition. We also find evidence of enduring price competitiveness in the long run of the acquisition event, shedding light on the potential facilitating role played by bankruptcy protection regulations in keeping and sustaining market contestability after the bankruptcy-filing period.     

Principles of micro-behavior commodity transport modeling

This paper presents an agent-based approach to commodity transport modeling. It assesses the effects of behavior-oriented transport policy measures while taking complex logistics reaction patterns into account. It is structured by modules describing company generation, supplier choice, shipment-size choice, carrier choice and tour construction. The behavior of individual actors is simulated using normative logistics models and accumulated market knowledge. Using a bottom-up approach, shippers and carriers interact through simulated auctions of transport contracts resulting in the generation of tours. Simulations using the model prototype INTERLOG calibrated with German data demonstrate the capabilities and limitations of this approach.     

The effect of LCC market entry on dominant FSC's price into long haul sector: A case of Norwegian competition on British Airways' prices on selected transatlantic routes

The concept of long-haul low-cost operations has become somewhat appealing in the airline industry in recent years. In Europe, the rapid expansion of low-cost carrier Norwegian that entered the long-haul markets from several large metropolises (London, Paris, Barcelona, etc.) imposed a burden of challenges to full-service carriers (FSCs). However, Norwegian operates a large portion of its long-haul service from London Gatwick by offering flights mainly on high-density routes. Although Norwegian's capacity and market shares on these routes are still at a low level mainly due to the carrier's “puppy-dog” strategy, it seems that its effect on British Airways, the dominant carrier on these markets, cannot be ignored. The purpose of the research is to examine the extent to which the presence of Norwegian affects the prices charged by British Airways on three selected high-density transatlantic routes performed from London area. The model applies simultaneous equation systems to determine how the emergence of Norwegian affects the price and the passenger volume of British Airways, as a traditionally dominant carrier, at the city-pair markets. The findings are consistent with the well-established view held in the literature, that a LCC's presence at a specific market would generally affect the incumbents to reduce their prices. Indeed, British Airways announced the capacity expansion as a counter-strategy to mitigate the competitive pressure induced by Norwegian and its affordable service.     

Introducing connecting flights in LCCs' business model: Ryanair's network strategy

In light of the ‘hybridization’ process characterizing airlines' business models, this work contributes to the literature by analyzing the rationale underpinning the decision to introduce connecting flights into the typical point-to-point networks of low-cost carriers (LCCs). By referring to the network of the largest European LCC, Ryanair, we provide evidence on how its new inter-connecting strategy is influenced by market, supply, and leg characteristics. Applying a probit model, results suggest that Ryanair is offering connecting flights on both non-directly offered markets and on markets that it already serves directly. The likelihood to observe a connecting flight increases at higher level of legs' frequency and at lower levels of Ryanair's legs' market share. Eventually, this new connecting strategy is negatively correlated with market distance, routing factor, direct frequency, and Ryanair's current O&D market share.     

Customer value of purchasable supplementary services: The case of a European full network carrier's economy class

There is a general trend in the airline industry to try to find ways to generate ancillary revenue by offering additional or unbundled services. Low-cost carriers in particular are known to offer unbundled services, but only a few network carriers have started to unbundle their services and seek ancillary revenues. Meanwhile, others do not attempt this, due to a possible negative impact on customer perception and their brand image.The goal of this study is to determine the viability and customer value of purchasable supplementary services for economy class passengers of European full-service network carriers. The focus of the study lies in determining specific characteristics of the customer value concept in the context of purchasable supplementary services. By conducting a choice model the implicit preferences in regard to purchasable supplementary service of economy class passengers were analysed. A survey was conducted at Zurich Airport in Switzerland and the results and analysis were built on the data of 249 respondents. The results show that economy class passengers do perceive value in purchasable supplementary services and display a general intention to purchase such services provided they give the passenger added value and utility.     

Impacts of LCC growth on domestic traffic and fares at largest US airports

This paper examines the evolution of domestic origin-destination air traffic and fares at the top 200 airports in the US between 1990 and 2008, with a focus on the impacts of low-cost carrier entry and growth. By 2008, 95 of the airports had an aggregate low-cost carrier market share of domestic traffic greater than 20%, up from 27 airports in 1990. Their entry or substantial growth at US airports has had significant impacts on lowering average fares and stimulating passenger volumes. This market stimulation effect has, however, diminished in recent years, as the difference in average fares between carrier types has narrowed and as the number of additional US domestic origin-destination markets able to support their entry has dwindled.     

The evolving low-cost business model: Network implications of fare bundling and connecting flights in Europe

In a context of limited organic growth, some low-cost airlines have considered business strategies that are changing two key principles of the low-cost airline business model: fare unbundling and point-to-point operations. Using a multivariate analysis we identify the influence of several route characteristics on the share that European pure low-cost and hybrid low-cost carriers have on the routes they operate. Results show that, from a network perspective, the distance between the archetypical low-cost carrier business model and the adapted low-cost carrier business model with a hybrid approach is widening. Differences are also clear between hybrids offering connecting services and hybrids offering fare bundling. The results are also important from an airport policy perspective, since secondary airports and legacy airports in transition could be able to reduce the gap between them and the main hub airports.     

中国高速铁路客运产品设计

以形成完整的中国高速铁路客运产品设计方法体系为目标，从分析客运产品层次及要素出发．提出客运产品设计原则与总体思路。研究客运产品的设计方法，从可达性、时效性、便捷性和经济性四方面研究列车开行方案设计及调整，从自助式、人性化、差异化等六方面研究服务产品设计，并提出中国高速铁路品牌战略。     

Mapping causalities of airline dynamics in long-haul air transport markets

The introduction of low-cost air transport services to short-haul routes has significantly shaped the structure of this market segment. Recent research investigates and discusses the transferability of the low-cost carrier business model to long-haul routes and identifies respective challenges such as lower cost advantages over the competing full-service network business model. Our paper complements the existing research with a review of airline dynamics in long-haul air transport markets and the subsequent development of a causal loop diagram of the transatlantic air transport market using systems thinking. The objective of this paper is to provide an overview of specific characteristics regarding airline operations in the transatlantic air transport market to investigate the market potential of long-haul low-cost carriers competing with full-service network carriers in this market. We implement these characteristics in a causal loop diagram which comprises the most important elements of and causalities within the long-haul air transport market that affect the development of these elements. These include the generation of transatlantic air transport demand, passenger choice, and airline ticket price and fleet development. The causal loop diagram serves as a framework for qualitative investigation of the market potential of long-haul low-cost services. The paper proves systems thinking to be a feasible approach to map causalities based on knowledge from scientific literature.     

旅客列车开行方案系统的开发研究

铁路旅客列车开行方案的确定涉及因素较复杂,研究开发旅客列车开行方案系统,以路网旅客OD流量为依据,得到开行方案的初步优化方案,然后根据实际情况进行相应调整,通过对列车进行点到点的技术经济评价,最终确定合理的旅客列车开行方案,有效提高市场经济条件下客运决策的效率和水平。     

Key drivers of passenger loyalty: A case of Frankfurt–Istanbul flights

This study aims to analyze the effects of factors such as image, satisfaction, price, and service quality on passenger loyalty toward full-service network carriers and low-cost carriers. A structural equation modeling approach was applied to identify the factors that significantly affect passenger loyalty. Using LISREL, data were collected from 237 passengers in face-to-face interviews in the baggage claim area of international arrivals at Ataturk International Airport in Turkey who traveled from Frankfurt to Istanbul and were used to test the proposed model. One hundred seventy-five out of these 237 questionnaires were considered as valid. The results indicate that 71% of the passenger loyalty is explained by image and image is explained by satisfaction. In addition, service quality and price are found to have positive effects on satisfaction. Compared with price, service quality is found to be a stronger determinant of satisfaction. This study concludes with the recommendations for managers and possible future research.     

Modeling the effects of wage premiums on airline competition under asymmetric economies of density: A case study from Brazil

This paper investigates the effects of wage premiums on the competition between Full Service Carriers (FSC) and Low Fare Carriers (LFC) in the airline industry. We study the impact of changes in the labor market and the resulting effects on performance in the product market and examine the role of economies of density. We develop an oligopoly model of airline competition with endogenous wages and simulate increases in labor costs. We apply the model to the case of the most important domestic route of Brazil using airline/route-specific demand and costs data. Our chief contribution relies on the empirical model of asymmetric economies of density for the competing business models. We estimate that LFCs have higher economies of density than FSCs. With the empirical models of demand, costs and wages, we compute the wage-elasticities of price-cost markups. We find that, on account of the higher sensitivity of marginal costs to labor costs of the FSCs, their markups are more affected by wage premium increases than the markups of the LFCs. The results are attenuated by higher economies of density, but amplified by higher price-elasticities of demand and lower economic growth.     

综合运输体系下客运结构合理配置模型及算法

分析在多种交通方式存在情况下乘客的交通选择行为,并基于随机效用理论和层次分析法构造了综合运输体系下客运结构合理配置模型及算法。考虑到我国现阶段收入水平是影响旅客交通方式选择的主要因素,将旅客划分为4类,并计算分析得到各类旅客的出行选择结果。该模型可用于客运市场份额预测,为优化配置交通运输资源提供理论依据。     

The growing influence of low-cost carriers in Northeast Asia and its implications for a regional single aviation market

This paper provides an overview of the development of the low-cost carrier (LCC) sector in China, Japan, and South Korea. It is the first paper that documents LCC contributions to the passenger traffic and cheaper fares in Northeast Asia (NEA)'s intra-markets. We argue that a single aviation market can facilitate the growth of the LCC sector, which in turn will make a significant contribution to the NEA connectivity, mobility, and integration. In addition, with a single aviation market, NEA countries can adopt a proactive, unified approach in negotiating air transport agreements with the major aviation partners to maximize the interests of this region as a whole, which will further provide valuable growth opportunities for the LCCs.     

Airline choice by passengers from Taiwan and China: A case study of outgoing passengers from Kaohsiung International Airport

Understanding what factors passengers consider when selecting an airline is critical, as airlines can utilize this information in market segmentation and marketing strategies. However, few studies have explored how passenger demographics and the nationality/type of carrier (full service or low-cost; regional or international) affect the choice factors of passengers when selecting airlines. The main objective of this study was to explore the airline choice factors considered by passengers, compare the choices of passengers with different demographics, and analyze which factors are emphasized by passengers from Taiwan and China when selecting airlines. We conducted a questionnaire survey of outgoing passengers at Kaohsiung International Airport in relation to 22 factors underlying their choice of airline. Using factor analysis, we identified the five factors: ground services, convenience, in-flight services, price, and travel availability. We then utilized cluster analysis to identify four groups, each concerned with price, comfort, convenience, and ground services, respectively. Nationality, age, income, flying frequency, and purpose of travel lead to differences in deciding which factors were considered by cross-strait passengers. Passengers of different nationalities concerned with different factors when selecting airlines. Our findings can add to the completeness of existing research as well as provide airlines with reference in developing marketing strategies for different customer groups.