Network industries in collision: aviation infrastructure capacity,financing and the exposure to traffic declines

This paper discusses how various aviation infrastructure service providers have dealt with the fall off in airline traffic following the terrorist attacks in the US on September 11th. It shows that these organizations have relatively high fixed costs and low incremental costs for providing services. As such, small changes in traffic have large impacts on revenue because revenues are generally proportional to activity. However, because of the high component of common and fixed costs, airport and ATS provider costs do not change in proportion to activity. When traffic declines, revenue shortfalls can arise because most airport and ATC systems operate on a simple cost recovery basis. The responses to the events of September 11th have also caused substantial increases in security costs. To the extent these costs are passed forward to system users, they will increase the price of travel and impact patronage further. Airlines also have substantial fixed capacity costs. The declines in traffic are often felt as an erosion of yields and fares as carriers seek to maintain traffic loads for the capacity they are going to operate. In general, the ability to pass along cost increases from providers to airlines or from airlines to passengers depends on relative supply and demand elasticities. Because infrastructure provision is often a monopoly, and the demand for airline services is price elastic, we suggest that most of the cost increases will be borne by the airlines. We also suggest that short-haul flights will be most severely impacted because the fees and taxes are a larger proportion of the fare for these flights. We also examine the extent to which additional infrastructure costs imposed on operators may exacerbate the downturn in their traffic.     

An assessment of delivery changes for UK terminal air navigation services

In order to meet government contestability policy ambitions, the United Kingdom Civil Aviation Authority (CAA) has undertaken a range of initiatives to create a competitive market for terminal air navigation services (TANS). This paper examines the critical dynamics underlying recent TANS service delivery changes at the nine United Kingdom airports that fall within the Single European Sky performance scheme (SES) using industry data and Porter's five forces model. Interviews with CAA, NATS and airport operators, along with publically available material, are used to explore the various elements impacting competition for TANS at these airports. Competition is intense among a very small number of companies. In addition to optimizing service cost, airport operators require greater value for money including alignment to strategic-operational goals, closer integration with other airside functions and payment structures that are performance based. Gatwick and Birmingham airports changed service provisions due to concerns about the value for money proposition offered by NATS Services Ltd (NSL). This paper also illustrates how competition has changed the customer orientation of NSL. It has been forced to evolve quickly from an expensive, perceived as somewhat arrogant, organisation to one that must be capable of aligning to the cost and service requirements of its customers. Importantly for the ATM industry this paper provides evidence that competition drives lower service costs and provides greater value for money for airlines and airport operators.     

The cost allocation approach of airport service activities

This study suggests a new allocation approach to the joint costs between airports and airlines and proposes estimates for airport service costs. Using correlation coefficients, data envelopment analysis and regression models, the research measures the relation and efficiency between service activity and airport operation costs. The regression outcomes not only reveal a significant management issue concerning the apron fee measurement, but also show that the airport physical activity cost drivers need to be considered with cost and revenue management. The DEA outcomes reflect the expansion of the terminal areas.     

Estimating the marginal costs of airport operation using multivariate time series models with correlated error terms

This paper explores insights about marginal airport costs that can be gained by analysing labour inputs and their variability. Based on hourly cost and traffic data for the airport of Helsinki, a multivariate time series approach is used incorporating correlated error terms to account for random shocks such as delays. We found for most airport services a linear relationship between labour input and aircraft movements, except for producing passenger services for international departing flights where a cubic cost relationship was estimated. The findings are comparable with earlier studies for US airports.     

Queue behavioural patterns for passengers at airport terminals: A machine learning approach

Passengers go through different handling processes inside airport terminal buildings. The quality of these processes is usually measured by the time passengers require and by the level of comfort experienced by them. We present an analysis of behavioural patterns in queues at check-in desks and security controls, which are two of the most critical processes regarding passenger service. The passengers' flow is simulated to obtain queue lengths at one busy European airport between 2014 and 2016, supported by real flight data. Simulation is designed as a store-and forward cell-based system, whose parameters have been tuned and validated with real data from observations and empirical capacity and demand studies within the airport. Random Forest algorithms are then implemented to develop different models for each parameter prediction, after a data analysis stage based on statistical and visualization methods. Feature analysis techniques between dependent variables and the target outputs (queue lengths) determine which are the fundamental elements to explain queue behaviour and to predict target variables. We provide a method to forecast behavioural patterns at check-in desks and security controls, to help airport operators to implement adequate response policies. Queue behavioural patterns are captured by Machine Learning models, which can be used to offer improved passenger services (such as real-time predictions for expected waiting time at queues), or can be considered in a dynamic approach for terminal services design (as the entire progress of terminal handling depends on the stochastic behaviour of passengers). This could be a key tool for managing passengers demand and optimise the infrastructure's capacity through resource allocation.     

Supply-and-demand models for exploring relationships between smaller airports and neighboring hub airports in the U.S.

Airport passenger leakage is the phenomenon of air passengers choosing to travel longer distances to access more extensive air services offered by airlines at an out-of-region hub (or, substitute) airport, instead of using their local airports. Airport leakage can cause further reduction in services offered by airlines at a local airport, thereby causing even further leakage, and so on, which can significantly impact an airport's role in the growth of the local economy. This paper explores the geographic and operational attributes of local-and-substitute airport pairs in the United States, explicitly accounting for the interactive feedback relationship between passenger volumes and air service characteristics that contribute to the onset, persistence, and exacerbation of airport passenger leakage. A two-stage least squares regression model of air passenger demand at small- and medium-sized airports is first presented, where local passengers may travel by vehicle to larger, out-of-region hub airports. The results confirm that airfare and passenger volume relationships exist between the local and substitute airport pairs included in the dataset, and that lower airfares at the substitute airport have a greater impact on airport choices made by larger travel groups. They also suggest the existence of positive feedback in that if an airport attracts increasingly smaller passenger numbers with fewer air services and fewer air services with fewer passengers, without external intervention airport leakage impacts may be irreversible and exacerbate over time. A conceptual market share equilibrium analysis is used to illustrate the mechanisms of a direct two-way feedback relationship between passenger volumes at a local airport and air service characteristics at both the local and substitute airports. With data, this quantitative framework can help guide airport planners in further assessing and verifying suspected passenger leakage issues at their airport. The results suggest that without intervention, airport leakage impacts may be difficult to reverse; further exacerbating the trend are technological advancements that make driving cheaper and easier (connected and autonomous vehicles). However, the results can also guide planners in choosing the types and degrees of infrastructure investments and airline incentives that may be used to expand or retain air services to attract passengers.     

The costs of peak-load demand: An application to Gran Canaria airport

Many airports suffer from peak-load demand problems. To meet unconstrained demand at peak periods, they often invest in extra capacity that may be under used at other times. We use data from the airport in Gran Canaria to illustrate that costs associated with the peak-load problem are not only those related to the new investment. This paper provides a methodology for analyzing the costs arisen due to the peak-load demand, to explore alternative airport policies and to illustrate the problem of congestion at airport terminals. The results suggest that a situation in which airports differentiate charges by peak and off-peak days would be much desirable.     

Airport selection criteria of low-cost carriers: A fuzzy analytical hierarchy process

The selection of airport is an important consideration for low-cost carriers (LCCs) to remain cost competitive. The objective of this study is to identify and rank the airport selection criteria of LCCs. Based on reviewing the existing literature, five main factors comprising 16 sub-factors were developed. The factors were first validated by three industry experts from the aviation industry. Thereafter, a survey questionnaire requiring a comparison of the factors was administered on 28 executives who were involved in the strategy planning and formulation of LCCs based in China or Korea. The collected data were analysed using fuzzy analytical hierarchy process (FAHP). In descending order of their importance, the main factors influencing LCCs' selection of airport are (1) airport charges, (2) airport performance, (3) airport growth opportunities, (4) catchment area and (5) airport infrastructure. The top three sub-factors are airport costs, demand for LCC services and passenger throughput. The research contributes to academic research by providing a holistic assessment of the key considerations influencing LCCs' selection of airport. In addition, it implicates policy formulation of LCCs by providing a framework for assessment of airports that are suitable for LCCs’ operations.     

Measuring airport service quality: A multidimensional approach

Currently, airports are expected to be operated as self-sufficient service organizations providing efficient and high-quality services to a variety of customers. In this context, improving airport service quality (ASQ) has become paramount. However, due to the complexity of the airport service environment, an effective process of measuring and analyzing passenger perceptions of ASQ is not easily achieved. Generic scales for perceived service quality might not cover some particularities of the passenger–airport interaction. Furthermore, while some measurement practices have been developed within the airport industry, there has been only limited consideration for validity and reliability. These concerns are certainly relevant to avoid misinterpreting passenger perceptions. In view of these concerns, this paper has a twofold objective. First, to fit a measurement model for perceived ASQ built on typical service measures within the airport industry. Second, to test for the model's equivalence across groups of passengers. Sample data from an extensive survey applied at a major Brazilian airport was used for confirmatory factor analysis. The results suggested that a six-factor structure provides a meaningful multi-item measurement model for perceived ASQ. The model was validated for international and domestic departing passengers with respect to its factorial structure and metric invariance. The proposed measurement model could be considered an alternative for a multidimensional approach in the context of airport performance measurement regarding service quality. Finally, the findings from this research might contribute to the discussion on passenger perceptions of ASQ, particularly concerning its multidimensionality and the need to review current practices for ASQ analysis.     

Optimising flight connection times in airline bank structure through Simulated Annealing and Tabu Search algorithms

In hub and spoke airline networks, flight arrivals and departures generally have a bank structure to increase connections among spoke cities through a hub airport in order to provide cheaper service for higher volumes of air traffic. In this study, we introduce the airline bank optimisation problem with a novel mathematical model for improving flight connection times. The mathematical model aims to minimise the total connection times for transfer passengers and generates flight schedules regarding slot capacities in the hub airports. Since the problem is a combinatorial optimisation problem NP-hard and computational complexity increases rapidly for real-world problems, we employ the simulated annealing and the tabu search algorithms to achieve better solutions in a reasonable time. We generate sub-problems using real-world data and investigate the effectiveness of the algorithms. Finally, we present the results of a real case study of a Turkish airline company which has a hub airport connecting the flights between Middle Eastern and European cities.     

Antecedents and consequences of passenger satisfaction with the airport

There is a growing interest in the passenger experience at the airport. Particularly, the relevance of passenger satisfaction has been emphasized. However, although different research approaches have been used, there is still a gap related to understanding the several relationships between aspects associated with passenger satisfaction with the airport. In this study, a comprehensive conceptual model, which includes the relationships between key antecedents and consequences of passenger satisfaction, was developed and examined. Using structural equation modeling analysis, several findings concerning passenger expectations, airport service quality, switching costs for changing airports, and passenger loyalty towards the airport are stressed.     

An application of the airport service quality model in South Africa

Passengers’ expectations of service quality at airports are becoming increasingly important as air traffic grows. This research investigated passengers’ perceptions of airport service quality at O.R. Tambo International Airport, South Africa. An existing model placing the concept of passenger expectations central to measuring an airport’s specific level of performance was applied. The results proved significant in terms of the investment made by the airport in staff training and highlighted areas for improvement. The results show that business travellers and leisure travellers have different opinions regarding the importance of services offered by airports and of the level of performance at ORTIA in particular. Significant differences also occur in the perceptions of frequent travellers and infrequent travellers.     

Exploring different nationality perceptions of airport service quality

In order to attain a sustainable competitive advantage, airports should strive to enhance multicultural passenger satisfaction through the provision of high quality services. The purpose of the current study is to determine the specific service quality components that can lead to increased traveler satisfaction in an international airport environment, and to evaluate the degree to which passenger perceptions of airport facilities, as well as levels of satisfaction, vary according to different nationalities. In order to achieve this objective, this paper examines the equivalence of service quality and satisfaction measures by applying the Rasch modelling technique. Airport service quality is found to be comprised of three distinct dimensions, namely “Servicescape and Image”, “Signage” and ”Services” and significant differences with service quality perceptions are exhibited among travelers of different nationalities. Overall, the results highlight the need to assess scale equivalence across different nationalities.     

Key drivers of passengers' overall satisfaction at klia2 terminal

The purpose of this study is to examine the airport service quality dimensions based on the ASQ survey and investigate the best predictor for overall satisfaction. The context of this study is the klia2 terminal passengers, which are predominantly users of the low-cost carriers at Kuala Lumpur International Airport. Secondary data obtained from the airport operator on the 2016 ASQ survey for the klia2 terminal was analysed using the PLS-SEM method. The grouping and impact of the thirty-three service quality elements from the ASQ survey were tested against the overall satisfaction element. The findings indicated that twenty-two out of the thirty-three elements were valid measures for the klia2 terminal users which forms the eight dimensions i.e. access, airport environment, airport facilities, arrival services, check-in, finding your way, passport and security. Airport environment was found as the best predictor in determining passengers’ overall satisfaction at klia2 terminal and should be given particular focus by the airport operator for continuous improvements.     

Do the regional growth effects of air transport differ among airports?

This paper empirically studies the contribution of air transport to regional economic development in Germany. We find that the scale and direction of output effects of air services and airport infrastructure differ among airports. These differences are driven by ‘opportunity costs’ of airport capital and by positive output effects from air transport connectivity. We argue that the latter impacts potentially depend on traffic characteristics.     

Evaluation of level of service for transfer passengers at airports

Transfer passengers have quite different needs than those of originating and terminating passengers. For example, they do not make use of airport access roads. Other facilities may or may not be used depending on the type of transfers, the airport's operational configuration and the airline services. Despite the increasing importance of transfer passengers for airport operations, little research has been done to determine their needs. This study analyses transfer passengers’ views on the quality of services at the terminal building, using data collected at Bandaranaike International Airport in Sri Lanka, which aspires along with the airline ‘Sri Lankan’ to be a major hub for South Asia. Regression analysis was used to identify the transfer passenger facilities and services with the strongest effect on the overall perception of level of service. The application of regression analysis to the data collected at Bandaranaike International Airport shows that the courtesy of the security check staff and the quality of the Flight Information Display are among the most valued by transfer passengers at that airport.     

Service quality in a mid-sized air terminal: A SEM-MIMIC ordinal probit accounting for travel,sociodemographic, and user-type heterogeneity

Service quality of the airline industry is still unexplored, if compared to the public transport service quality literature. In this paper, we propose an analysis of the services provided by an Italian airport based on an SEM approach. Specifically, we propose a SEM-MIMIC ordinal Probit capturing the heterogeneity in perceptions of air transport passengers and identify groups of passengers with similar assessments of the services. Results suggest the presence of four constructs affecting the overall satisfaction at the terminal, namely information, control, environment, and food service. Results also suggest that there are two different user-types: accessory user (who uses ticket office, luggage trolleys, and escalator lifts), and technology user (who uses charging stations, airport website, and airport wi-fi).     

Passengers perceptions of airport branding strategies: The case of Tom Jobim International Airport – RIOgaleão,Brazil

This study examines the passengers perceptions of Tom Jobim International Airport – RIOgaleão branding strategies and its impact to their experiences in light of the airport branding elements proposed by the literature. To achieve these aims it was conducted a semi-structured interview with the airport's branding manager and a questionnaire with the passengers (n = 92). The findings showed that the airport's new management company has been employing tourist branding strategies using a mix of elements, but it is possible that these actions have had the main objective of raising the airport to international service standards, whereby the operation of terminals by large companies is a trend. It was also concluded that some of the airport branding elements (i.e. logos and slogans) are well developed and represent a higher impact on passenger experience, while others (i.e. retail pricing strategies) require further attention and new approaches in order to improve passenger experience in the terminal.     

A methodology for establishing operational standards of airport passenger terminals

This paper discusses a methodology for establishing the operational standards of service performance of airport passenger terminals using a perception–response model. The proposed approach is defined by the graphical representation of passengers’ collective attitudes towards the range of operational service at an airport passenger terminal. It adopts new concepts to establish service standards through a special survey to better interpret terminal operations and service level at each facility. It is expressed in terms of passengers’ perception of various service levels and their response to the respective service conditions. The methodology may provide practical service standards of airport terminals and prove to be a practical and convenient technique to airport planners, designers, consultants, operators, and airport managers.     

Seasonality and price behaviour of airlines in the Alicante-London market

This article focuses on airline prices in the Alicante-London market. It analyzes price evolution over short periods to observe the incidence of seasonality, the types of firms involved, timetabling, types of airport, competitiveness, and variables such as the price of jet fuel and the rate of exchange used by airlines to establish prices. The paper shows the relative incidence of these variables and stresses the relevance of seasonality and competitiveness in the price strategies followed by the different types of company.