Managing New Zealand's airports in the face of commercial challenges

This paper explores commercial issues surrounding managing airports in New Zealand. Airport managers face pressures from changing airport–airline relationships, low cost airlines, proposed new airports and the growing importance of non-aeronautical revenues in achieving commercial goals. New Zealand's airports have moved from an operating environment within which all the principal airports were owned and managed by central government to one where airports are run as commercial entities under a variety of ownership structures. New Zealand has a high dependence on air transport and for its size, a very developed regional airport network.     

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.     

Policy issues and planning of UK regional airports

The principal motivation for this paper is to examine the policy issues for UK regional airports within the air transport system with particular reference to airport airline relationships. The geography of airline route networks is considered a key factor that determines location of the pressure for infrastructure development. Regional airports policy is considered in this context. The problems of the resultant concentration of air traffic has largely been ignored up until now and so this paper seeks highlight the issues this presents to policy makers. The paper reviews the changing regional airport ownership patterns and examines a range of implications. It then explores the policy implications for the future regulation and development of the air transport system. The authors contend that regulation and the planning system are the only two remaining policy levers for government to guide privately owned airlines, privately owned airports and commercialised airports towards national policy goals.     

Air transportation and urban-economic restructuring: competitive advantage in the US Carolinas

The theoretical agenda of this paper is to bring airports and airline operations more squarely into the mainstream of the urban and regional development literature. The paper examines the spatial and temporal patterns of air passenger flows by airport in the US Carolinas. An emphasis is placed on articulating the linkages that exist between airport operations at the local level, the structural composition of the regional economy, and the competitive strategies of the airline industry. Particular attention was paid to administrative and auxiliary employment levels because it is a knowledge-based producer service that tends to seek out markets that offer high levels of air service connectivity to other places. A major finding in this paper is that those US Carolina airports that experienced significant gains in air passenger volume (e.g., Charlotte and Raleigh-Durham) tended to experience comparable gains in the employment levels of administrative and auxiliary workers, particularly in the manufacturing sector.     

Local emission charges – A new economic instrument at German airports

In January 2008, charges were introduced at selected German airports aimed at reducing local emissions of nitrogen oxide and hydrocarbon. The charge is aimed at setting economic incentives to accelerate the introduction and foster the use of environmentally friendly engine technology and is designed to be revenue-neutral in the sense that it does not increase the airports' overall revenues from air traffic. To achieve this, the general landing fees need to be decreased by the amount of the emission charge. The introduction of this charge will have economic impacts on airlines and may have an impact on airline competition in the German air transport market. Case studies based on empirical data are presented for selected German airports. The results indicate that airline's finances will be affected differently by the emission charge, depending on the engines employed and on the aircraft population of the airport considered.     

A study on passengers' airport choice behavior using hybrid choice model: A case study of Seoul metropolitan area,South Korea

Improving explanatory power is significantly important to understand variables that affect attitudes and perceptions in the decision process. This paper estimates not only tangible attributes but also intangible perceptions and attitudes using a hybrid-choice model to study air passengers' flight choice behavior. The empirical study was conducted for the choice behavior of air passengers at Seoul Metropolitan Area, South Korea. The analysis uses a two-level Nested Logit model in order to examine which factors have more effect on passengers’ choice of airport and airline simultaneously by using airport and airline choice attributes. The study also estimated the parameters in the equations relating the latent variable by using Structural Equation Model (SEM). The results indicate that the models with latent variables have improved Goodness-of-Fit when compared to classical discrete choice models and effectively capture psychological factors that affect choice behavior of passengers.     

Airport–airline vertical relationships,their effects and regulatory policy implications

This paper examines the forms and effects of vertical relationships between airports and airlines with a focus on the North American and European aviation markets. We find that such vertical relationships enables those participating to achieve various benefits and may be formed as a competitive response to other competing airport–airline alliances. In some cases, vertical airport–airline relationships strengthen the hub status of major airports, leading to increased employment and service quality in local markets. On the other hand, preferential treatment of a particular airline by an airport may enhance that airline’s market power, allowing it to dominate the airport and charge hub premiums. The competition and welfare implications of airport–airline vertical alliances can be complicated and two-sided, subject to the influences of other factors such as the market structures of the airline and airport markets.     

The effects of use agreements on airport efficiency

Bilateral contracting is integral to the working relationship between airports and airlines. In the U.S., the three common types of airport use agreements are the residual method, the compensatory method, and the hybrid method. Under a residual agreement, the financial risk of the host airport is borne by the signatory airlines, and in return, the signatory airlines pay reduced user fees. Under a compensatory agreement, however, airports bear their own financial risks in the absence of a signatory airline. A hybrid agreement combines the features of residual and compensatory agreements. For example, under a hybrid agreement, airports usually bear their own financial risks in terminal operations while the signatory airlines take over the financial risks in airfield operations. The aim of this paper is to determine whether these three types of business agreements affect airport operational efficiency. Using 2009 to 2016 yearly data of 59 U.S. hub airports, we find that airports with residual-type agreements tend to have lower operational efficiency. This implies that, although under a residual agreement, the signatory airlines pay favorable airport fees and charges, increased airport inefficiency may undercut any potential benefits of the agreement.     

Effects of competition and policy changes on Chinese airport productivity: An empirical investigation

This paper investigates the influence of competition and aviation policy reform (for example, the airport localization program and listing airports on stock markets) in China on the efficiency of Chinese airports. By using Data Envelopment Analysis, we estimate both the productivity level and its growth for 25 sample Chinese airports. After controlling for hub status and other airports' characteristics, we find that: (i) publicly listed airports are significantly more efficient than non-listed airports; (ii) airports with more competition are more efficient than their counterparts; (iii) the airports' efficiency and the technical progress are positively correlated with the airport localization program; and (iv) the impacts of open-skies agreements and airline mergers on the airports' efficiency are statistically insignificant.     

Operational efficiency of Asia–Pacific airports

Airports are important drivers of economic development and thus under tremendous pressure from emerging competitors. However, few studies have analysed the operational efficiency of Asia–Pacific airports. This study therefore evaluated the operational efficiency of 21 Asia–Pacific airports between 2002 and 2011. A two-stage method was used: Data Envelopment Analysis (DEA) to assess airport efficiency, followed by the second-stage regression analysis to identify the key determinants of airport efficiency. The first-stage DEA results indicated that Adelaide, Beijing, Brisbane, Hong Kong, Melbourne, and Shenzhen are the efficient airports. The second-stage regression analysis suggested that percentage of international passengers handled by an airport, airport hinterland population size, dominant airline(s) of an airport when entering global airline strategic alliance, and an increase in GDP per capita are significant in explaining variations in airport efficiency.     

The impact of airline lease agreements on the financial performance of US hub airports

This paper employs benchmarking analysis to examine the financial implications of the different types of airline lease agreements used by US airports. Five key financial performance areas relating to cost effectiveness, revenue generation, commercial performance, financial profitability and capital investment are analysed using financial data from 2011/12 for 23 of the 29 large-hub airports. The results show that compensatory airports are the most financially efficient, particularly in terms of debt efficiency, revenue generation and profitability while the vertical airport airline relationship that is common at residual airports delivers higher levels of commercial performance and cost efficiency.     

Investigating factors that influence passengers' shopping intentions at airports – Evidence from Taiwan

This study examines the influence of passengers' socio-demographic characteristics, trip characteristics and perceptions of airport shopping on their shopping intentions at airports. We collected a sample of passenger survey data at two major international airports in Taiwan. Two primary shopping intentions, namely pre-planned shopping and impulse shopping, are identified based on the results of factor analysis. A seemingly unrelated regressions (SUR) model is then adopted to measure the relationships between the two buying tendencies and potential determinants. Passengers' perceptions of airport shopping show positive impacts on their shopping intentions. The SUR results also reveal significant differences among the personal profiles of passengers in determining various shopping tendencies.     

Competitive drivers towards improved airport/airline relationships

This paper draws on a recent report from Copenhagen Economics, with which both authors were involved, to argue that the European airport market has changed such that airports are now subject to competitive constraints from a number of sources. While these will bite differentially according to the circumstances of individual airports, airport possession of significant market power can no longer be casually assumed; nor, therefore, can the need for economic regulation. Indeed, the costs and benefits of economic regulation need to be carefully assessed against the extent and nature of the market power it is intended to countervail. In particular, increasing attention needs to be paid to the risks of economic regulation hampering both the further growth of airport competition and the development of more productive commercial relationships between airports and their airline customers which have the potential to create added value for both parties.     

The impact of airport capacity constraints on future growth in the US air transportation system

This paper simulates airline strategic decision making and its impact on passenger demand, flight delays and aircraft emissions. Passenger flows, aircraft operations, flight delays and aircraft emissions are simulated for 22 airports in the US, under three airport capacity scenarios. The simulation results indicate that most system-wide implications for operations and environmental impact seem to be manageable, but local impacts at congested hub airports may be significant. The response of the air transportation system to avoid airports with high delays could significantly impact passenger demand and air traffic for these and directly dependent airports. The simulations also suggest that frequency competition effects could maintain flight frequencies at high levels, preventing a significant shift toward larger aircraft, which would otherwise reduce the impact of the capacity constraints.     

Effect of concentration in airline market on Spanish airport technical efficiency

This paper tries to measure the effect of airline market concentration on airport technical efficiency. With this aim, a Stochastic Frontier Analysis (SFA) is applied, estimating with a one-step procedure technical efficiency and the effect of airlines' market power on that efficiency. Results suggest that when airports are lowly concentrated increasing concentration reduces such inefficiencies. However, this effect practically disappears when airports are highly concentrated. Additionally, the government's policies to improve airports' performance seems to have a positive effect in the short run.     

Low-cost airlines and airport competition

An important question from the viewpoint of competition analysis in the air transport industry is the extent to which low-cost airlines operating from a secondary airport compete with full-service airlines serving a main airport in a multiple airport region. In this paper we address the issue of the competition between full-service and low-cost airlines serving adjacent airports in the Greater London using econometric estimation of demand structure (own- and cross-price elasticities). Our analysis follows the methodology in (Pels, E., Nijkamp, P., Rietveld, P., 2000. Airport and airline competition for passengers departing from a large metropolitan area. Journal of Urban Economics, 48 (1), 29–45, Pels, E., Nijkamp, P., Rietveld, P., 2003. Access to and competition between airports: a case study for the San Francisco Bay area. Transportation Research Part A: Policy and Practice, 37 (1), 71–83). It is based on the nested logit model which we use to capture three key dimensions of passenger choice: air fare, surface-access costs and frequency. We obtained estimates of the own- and cross-price elasticities, which was the focus of our interest. On the basis of our understanding of the industry dynamics we find these estimates, especially of the cross-price elasticities, to be on the low side.     

Relevance of airport accessibility and airport competition

Airport accessibility is an important criterion for airport competition. The relevance of airport accessibility and airport competition was studied in this paper based on the panel data collected from nine large airports in Jiangsu province, China from 2005 to 2014. The results showed that the cost of expense, time and fatigue for the arrival at the airport are proposed to quantify levels of fastness, economy and amenity for the passengers to arrive at airport. The airport accessibility is significantly affected by airport passenger traffic and airline frequency. The passenger traffic can be increased by 2% with 1% increase of airport accessibility based on the analysis results of the nine large airports in Jiangsu province.     

Statistical modelling of runway incursion occurences in the United States

Runway incursions are an important aviation safety concern; between 2002 and 2015 there were 16,785 runway incursions at United States airports ranging in size from small general aviation (GA) to large commercial airline hubs. When examining airports with the 50 highest incursion count over the past 5 years, the predominant categories were large hubs, which accounted for 21 airports and general aviation (GA) airports which accounted for 16 airports. In June 2015, the Federal Aviation Administration (FAA) announced the Runway Incursion Mitigation (RIM) program to identify airport risk factors that might contribute to a runway incursion and develop strategies to help airport stakeholders mitigate those risks. Different size airports serve different aircraft fleets, serve different operating volumes, and have different resources available (both funds and technologies) for incursion mitigation. Therefore, it is valuable to determine the correlating factors that affect incursions at different size airports. This paper uses econometrics based modelling techniques to identify statistically significant factors in data provided by the (FAA) public web sites on runway incursions. The model identified statistically significant variables that correlate with incursions, based on severity, for airports categories defined by the National Plan of Integrated Airport Systems (NPIAS).The model results indicate that operational incidents (OI) are more likely at large hub airports. In contrast, at GA/non-hub airports, pilot deviations (PD) were significant for less severe incursions (severity C and D). Only one variable, “number of years since 2002”, was found to be significant for all the three airport categories; this variable was correlated with severity A incursions and indicated a statistically significant reduction in severity A incursions, despite an overall 80% increase in incursions between 2002 and 2015.     

The opening of direct flights across the Taiwan Strait: the impact on the global role of Taiwan’s international airport

Scheduled direct flights between Taiwan and Mainland China were halted for six decades and restarted in December 2008. The Taiwan’s government has a policy of developing Taoyuan International Airport (TPE), the major international airport in Taiwan, as one of main hubs in East Asia, based on the airport’s access to Mainland China. To assess whether the airport is progressing toward meeting the set expectation, this study evaluates the changes in airline networks of the TPE after the opening of direct flights across the Taiwan Strait. The time-dependent earliest arrival time algorithm is applied to global flights in 2004, 2008, and 2012. Empirical evidence demonstrates that providing direct flights across the Taiwan Strait has significantly increased accessibility from TPE to airports in China, but did not improve the centrality of TPE. Additionally, the transfer dependency of TPE on other airports is increasing significantly. This result was based on two major reasons: the first involves the Chinese government’s refusal to allow Chinese citizens to use airports in Taiwan as transfer points to and from other countries and the second reflects the competitiveness among airports and airlines in the region. The key finding is that political exclusion of airline use by external governments via travel regulations adversely influences the development of an airport as a global hub.     

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.