Segmentation of low-cost flights users at secondary airports

Low-cost carrier services are important for many tourist destinations. However, there is little information about the characteristics of travellers using low-cost airlines, and their flight preferences. The typical segmentation of air travellers is business versus leisure travellers; and business versus tourist fares. We use segmentation analysis focusing on low-cost travellers’ valuations of various flight attributes and trip-related characteristics, most notably those related to destinations, based on a sample of foreign travellers who used Girona Airport, Spain.     

Entry effect of low-cost carriers on airport-pairs demand model using market concentration approach

The trend of open sky policies and growth of low-cost airlines, the topic of airport-pairs demand is gradually being addressed in the golden aviation circle of Northeast Asia. The variety of flight services among the four major metropolises with dual-airport systems leads to a competition-cooperation relationship existing between various airports and airlines. Therefore, this study investigates the causal relationship between the route-level passenger demand and influential factors using aggregate data collected through website observations. The empirical study focuses on direct flights of airport-pair routes among Taipei, Shanghai, Seoul, and Tokyo. Results of the passenger regression model indicate that frequency, code-share, and morning flights have positive impacts on increasing passenger numbers for airlines. Further, the market concentration degree of Herfindahl-Hirschman Index and entry effect of low-cost carriers are important for the route-level passenger demand. In addition, routes with departures and arrivals in hub airports have a considerable attraction relative to other airport-pair routes. Finally, the proposed passenger model performs well in predicting market share, especially for routes with high demand.     

An airline's management strategies in a competitive air transport market

Over the last decade, the demand for domestic and international flights in Korea has increased substantially. To meet the strong flight demands, several low cost carriers have begun to offer flight services. In addition, full service carriers have been motivated to establish their own subsidiary low cost carriers to maintain their market share against rival low cost carriers. This paper studies the management strategies of three kinds of airlines - full service carrier, its subsidiary low cost carrier and rival low cost carrier - based on game theory in the competitive air transport market. Each airline is assumed to act as a player and chooses strategies regarding airfare, flight frequency, and the number of operating aircrafts for specific routes while maximizing its own profits. Demand leakages between the airlines are considered in the flight demand function according to the selected strategies of all airlines. Through various game situations reflecting realistic features, this study provides managerial insights that can be applied in the competitive air transport market.     

Airline services marketing by domestic and foreign firms: differences from the customers’ viewpoint

Based on a survey of 1014 passengers of five European airlines, this paper reveals differences between passengers on the Turkish domestic airline and those on four foreign airlines on the same flight destinations with respect to demographic profiles, behavioral characteristics, understanding of airline service dimensions, and satisfaction levels. Differences between the two passenger groups are highlighted in terms of age, sex, education, occupation, sector affiliation, location of domicile, travel purpose, travel frequency, service expectations, and satisfaction levels. It is concluded that the differences in consumer profiles and expectations are valuable clues for domestic and foreign airline firms in understanding their consumers and in designing their marketing strategies.     

Air transport and tourism—Perspectives and challenges for destinations,airlines and governments

Air transport and tourism are interlinked. Tourism is a driving factor for and, in some cases, a stimulator of change in air transport; most notably the development of new business models such as charter airlines. On the other hand, air transport opened new destinations and tourism forms such as long-haul excursions. Here these interlinks are analyzed in a system model. For the strategic development of destinations, a clear airline policy and air access strategy seems to be necessary. For airlines an assessment and understanding of the business models of destinations is essential. By shaping the external regulative environment of air traffic, government may influence air traffic as well as tourism.     

The effects of global alliances on international flight frequencies: Some evidence from Italy

We collect half-yearly data on nonstop flight frequencies offered by carriers on routes originating from Italian regions to European countries in the period 1998–2010. We find that, as the share of flights belonging to global alliances increases, the number of flights offered by airlines simultaneously expands, especially in the case of full-service carriers. Moreover, there is also evidence that the number of global alliances has a positive impact on flight supply.     

The propensity of business travellers to use low cost airlines

The liberalisation of air transport regulations in the EU has led to the introduction of a number of new airlines serving short haul point to point routes (e.g. easyJet, Ryanair, Debonair, Virgin Express, Go and others). While some of these routes are clearly leisure oriented (e.g. Palma, Ibiza, Venice and Nice), anecdotal evidence suggests that a significant number of travellers are using these services for business related trips. A number of recent studies suggest that pressure is being brought to bear on business travellers to reduce travel expenditure (IATA, 1997. International Air Trasport Association, Press release, No. PS/13/9, 27 January 1997; Bender, A., Stephenson, F., 1998. Journal of Air Trasport Management 4 (2), 99–109; Mason, K.J., 1998. In: Selected Proceedings of the Eighth World Conference on Transport Research (forthcoming)). This paper details a stated preference (SP) survey of European business travellers to assess the propensity for business travellers to use short haul low cost airlines. The study assess the utility placed by travellers on price, airline reward schemes, flight frequency and in-flight comfort service attributes. Price is shown to be the most important purchase factor followed by in-flight comfort and then flight frequency. The study demonstrates the effect of company size on traveller's selection of these utilities.     

Price volatility in the airline markets

In this article we examine volatility measures and investigate what factors explain price volatility in different US domestic air routes. We find that volatility remains reasonably stable up to 2 weeks prior to the flight, at which point it increases significantly. The type, LCC or legacy carrier, and identity of the airlines appears to have a major impact on the volatility measures, and that these effects are different for 2 weeks out and 1 day out, even after controlling for market differences.     

A model for projecting flight delays during irregular operation conditions

On-time performance of airlines schedule is key factor in maintaining current customer satisfaction and attracting new ones. This requires management of the different operation resources (crew/aircraft) to ensure their on-time readiness for each flight in the planned schedule. However, flight schedules are often subjected to irregularity. In particular, weather accounts for nearly 75% of system delays. Due to the tight connection among airlines resources, these delays could dramatically propagate over time and space unless the proper recovery actions are taken. This paper presents a model which projects flight delays and alerts for possible future breaks during irregular operation conditions. The results of applying the model at the operation control center of a major airlines company in the US are presented.     

The cost of abatement options to reduce carbon emissions from Australian international flights

In 2012, a total of 13.1 million tonnes of carbon dioxide were emitted by 14 airlines while transporting 72 per cent of international passengers into and out of Australia in 2012. With passenger and cargo traffic growing at between five to six per cent annually from 2013 to 2033, acquiring more fuel efficient aircraft to both renew the existing fleet and to service growth has the greatest potential in reducing emissions over the next 20 years. Our analysis shows that implementing carbon dioxide emissions abatement options such as installing light weight seats, iPad electronic flight bags, winglets, washing aircraft engines and reducing the number of engines used during taxiing, all offer net financial savings when considered over 20 years. Acquiring new fuel efficient aircraft has the biggest impact on emissions reduction. Low interest loans and longer loan repayment periods may incentivise airlines to acquire more fuel efficient aircraft to service traffic growth but other complimentary incentives and penalties are required to influence airlines to replace their current fleet with more fuel efficient aircraft.     

Effects of internal resources on airline competitiveness

This article examines the performances of 114 major international airlines between 1987 and 2010 using the resource-based theory. Results show that intangible resource is the most important resource among the human, physical and intangible resources at the aggregate industry level. In addition, successful airlines need to be able to provide an adequate level of service at relatively low cost. Nonetheless, some airlines enjoy higher profits than the others due to the country-specific differences arising from the bilateral open skies agreement between countries, the geographical location of the airline hub etc. There are also evidences suggesting an increasing consumer acceptance of new airlines, which connote that established airlines cannot be complacent. Following the emergence of budget airlines that provide point-to-point service to short distance destinations, full legacy carriers could differentiate themselves by offering direct connections on long-distant flights.     

The relationship between on-time performance and airline market share: a new approach

We propose a new method of modeling the relationship between on-time performance and market share in the airline industry. The idea behind the method is that the passengers’ decision to remain (use same airline) or switch (use other airlines) at time t depends on whether they have experienced flight delays at time t−1 or not. More specifically, we posit that the passengers who experienced flight delays are more likely to switch airlines for the subsequent flight than those passengers who did not experience delays. To capture such effect, we develop an aggregate-level Markovian type model that estimates the transition probability matrices separately for the passengers who experienced flight delays at time t−1 and for those who did not experience delays. The model was calibrated with the US DOT data. The study results imply that, once experiencing flight delays, passengers are more likely to switch airlines. The results also imply that on-time performance affects a carrier’s market share primarily through the passengers’ experience, and not though the “advertisement” of performance.     

New Europe,new low-cost air services

Only a few years ago European low-cost service was almost exclusively focused on Western Europe. However, the enlargement of the European Union to East Central Europe has brought with it an expansion of the liberalised air space, thereby offering new opportunities for service to Community airlines. Low-cost air service has since diversified in favour of new west–east air links that represent almost 60% new routes that have opened up between Western and East Central Europe. The western low-cost airlines dominate the market rather than Eastern European ones. The new west–east routes reflect new forms of mobility: post-migration flows from the east by those who have gone to work in Western Europe, new tourist practices and undoubtedly new types of business as well.     

The welfare effects of the allocation of airlines to different terminals

Many airports around the world have recently built, rebuilt or are in the process of constructing new terminals. Incumbent airlines and new entrants must be allocated to the new and old facilities. When spaces at airport terminals are directly allocated, the allocation should be done by taking into account the implications for airlines’ competition and social welfare, given the airlines’ network configuration. We use a theoretical model in which two airlines compete in prices with differentiated products for a given network structure. The model shows that, in general, if airlines are allocated to different terminals, the level of competition is reduced, the ticket prices are higher and the consumer surplus and social welfare are lower. Only in some routes, and under certain conditions on the market size, ticket prices may be lower.     

Estimating the sensitivity of small airport catchments to competition from larger airports: A case study in Indiana

An accurate estimation of airport catchment area enables airlines and airport operators to make informed decisions and to target potential markets precisely. This study uses the state of Indiana as a case study to estimate traffic leakage from the local airport, Indianapolis International Airport (IND), to two large hub airports in Illinois, the neighboring state of Indiana, namely Chicago O'Hare International Airport (ORD) and Chicago Midway International Airport (MDW). By using a decision making model that considers flying cost and access cost, this study simulates from local passengers' perspective which origin airport delivers the most cost effective flight itinerary. Using the top 20 routes of IND in 2018 as model inputs, the catchment area of two Chicago based airports in Indiana with variable coverage is plotted for different traveling scenarios. The analysis shows that an airport catchment area is sensitive to location, service level and traffic volume of competing airports nearby, as well as purpose of travel (business or leisure), number of travelers in a group (single, couple, family or multiple), length of trip, destination (domestic or international), preference of airlines (network carrier or budget carrier), and frequent flyer program status (premier member or general member). These findings could be valuable to all three aforementioned airports as well as airlines serving these airports when allocating operational and marketing resources. More importantly, this study creates a generic model that could be used by virtually any airport to estimate scenario-based catchment area using readily available itinerary and spatial data without resorting to expensive passenger surveys.     

Determinants of flight delays at East Asian airports from an airport,route and network perspective

Previous studies on determinants of flight delays have been limited to the attributes of departure and arrival airports and routes and experiences in North America and Europe. This research extends the existing discussions by considering a network perspective to explore East Asian airports. A total of 4611 routes among 318 airports in the second half of 2017 are analyzed using panel data regressions. Results show that the attributes of airports and routes linked with the departure and arrival airports of a flight are the essential determinants of flight delays in East Asia. However, the congestion internalization and hubness effect of departure and arrival airports suggested in previous research are not observed in this region. The associations of slot control levels and route attributes with delays are varying between airports inside and outside China and domestic and international routes. This research supplements a new perspective to understand the determinants of flight delays in existing literature and provides a rarely observed knowledge to encourage East Asian airport operators and carriers developing management strategies for minimizing flight delays.     

The impact of flight delays on passenger demand and societal welfare

US airline passengers increasingly have access to flight delay information from online sources. As a result, air passenger travel decisions can be expected to be influenced by delay information. In addition, delays affect airline operations, resulting in increased block times on routes and, in general, higher carrier costs and airfares. This paper examines the impact of flight delays on both passenger demand and airfares. Delays are calculated against scheduled block times as well as against more idealized feasible flight times. Based on econometric estimations, welfare impacts of flight delays are calculated. We find that flight delays on a route reduce passenger demand and raise airfares, producing significant decreases in both consumer and producer welfare. Since producer welfare effects are estimated to be three times as large as consumer welfare effects, we conclude that from an economic efficiency rationale, airlines should be required to pay for the bulk of flight delay remediation efforts.     

Modelling airline flight cancellation decisions

In order to predict airline responses to Traffic Management Initiatives (TMIs), and reveal the underlying preference structures that shape these responses, we study US domestic airlines’ cancellation decisions in response to the Federal Aviation Administration (FAA)’s TMIs, in particular, to Ground Delay Programs (GDPs). By observing the actual flight-cancellation choices made by airline dispatchers, the airlines’ cancellation utility functions can be inferred through the use of binary choice models. The model captures how delays to a given flight and potential delay savings to other flights affect flight cancellation decisions. We also find larger, fuller, less frequent, shorter-distance, and spoke-bound flights are less likely to be cancelled, and that there is inter-airline variation in flight cancellation behaviour.     

A method for reducing information asymmetry in destination–airline relationships

We propose a measure of business risk in air travel demand at the route level that can reduce information asymmetry during route development negotiations between tourism destinations and airlines. Aviation-exposed risk (AER) conveys information about the level of uncertainty with regard to air travel demand from an airline’s perspective. Using AER, tourism destinations and air service development teams can evaluate their risks from the perspective of the airline and its network. From there, an assessment can be made as to the value of air services in certain circumstances, including whether a direct underwrite or risk share between airlines and destinations is viable and necessary. By applying a portfolio analysis to an airline’s network, we find evidence that AER does indeed mimic the actual capacity distribution of the network. This provides support for AER as a useful risk measure to be used in practice.     

Cost savings from trajectory deviations in the European air space

Air transport deregulation has lead to an increase of air traffic, together with a reduction of air fares. Air fare reduction has narrowed operational margins of airlines, bringing financial and employment instability. This has brought airlines to pay increasing attention to flying costs reduction. Two important components of flying costs airlines can try to cut modifying the planned flight are en route charges and operational costs. We rely on Demand Data Repository (DDR2) data to calculate deviations from planned flight trajectories to analyse the extent to what airlines try to cut operational costs making shorter flights than planned if possible, and cut en route charges providing a planned flight with lower en route charges than the planned flight. Our findings show that there is no generalised strategy among airlines to reduce en-route charges asking for deviations of the planned route. On the other hand, airlines are achieving savings of operational costs regularly. Higher savings per nautical mile are obtained in night flights, with longer planned distance and operated by low cost carriers.