An Exploratory analysis of flight delay propagation in China

Delay propagation is the flight departure delay caused by the arrival delay of pre-segment flight. Chinese airline market has suffered very poor on-time performance (OTP) in recent years. It is, however, unclear whether delay propagation prevails as one major source for such problem. This study first aims to empirically quantify delay propagation in the Chinese airline market. Specifically, we shed light on heterogenous levels of delay propagations across different airports and airlines. Then, the distinct delay propagation patterns in China are also discussed and compared with other developed airline markets (e.g., the US and Europe). Our estimation is based on OTP data for over 12 million Chinese flights covering the 2015–2017 period. Specifically, it is found that 10 min arrival delay of pre-segment flight within 1 hr before the departure lead to an average of 7.49 mins delay propagation for subsequent departure flight. Arrival delay of earlier pre-segments (1–2 and 2–3 hr before the departure) leads to much less delay propagation, due to longer ground buffer. Chinese airlines arrange longer ground and flight buffer than that of the US airlines to prevent the delay propagation from accumulating along the subsequent flights in a day. Thus, unlike the US market, delay propagation is not the major reason for poor OTP in China. In addition, delay propagation is less prevailing at the Chinese hub airport. This is because China has relied on point-to-point network, which does not require sophisticated schedule coordination. And the local passengers at these Chinese hub airports have higher time value such that the Chinese airlines also try to improve OTP at these hub airports to better serve these lucrative but time-sensitive local passengers. Unlike the European LCCs, Spring Airlines, the largest low-cost carrier (LCC) in China, outperforms major full-service carriers (FSCs) in controlling delay propagation. This finding may also apply to other Northeast Asian LCCs sharing common operational characteristics as Spring Airlines. Last, we find that airlines purposely tolerate moderate departure delays of up to 15 min, which is the threshold that defines delays, no matter whether the pre-segment flight arrives late or on-time. The relevant policy and managerial implications are also discussed.     

What hurts the dominant airlines at hub airports?

This paper estimates a frequency equation to explain the determinants of network airline service levels at their hub airports. Drawing on European data for 2002–2013, we find that network airlines reduce frequencies when the share of low-cost airlines increases both on the route and at the hub airport. On the contrary, frequency choices of network airlines are not affected by competition from low-cost airlines operating in nearby secondary airports. We also find some evidence that mergers in Europe may result in a re-organization of the route structure in favor of the hubs of the larger airline.     

Cost convergence in the US airline industry: An analysis of unit costs 1995–2006

Recent changes in the strategies of US airlines have led to a convergence of unit costs between the network legacy carriers and low-cost carriers. We develop a methodology for breaking down operating cost data reported by the airlines and argue that certain cost categories must be excluded to make a valid comparison between the carrier groups. We find significant evidence of convergence in unit costs excluding fuel and transport-related expenses, and labor unit costs in particular. While network legacy carriers have improved cost efficiency through dramatic labor cost reductions and longer stage length flying, low-cost carriers labor unit costs continue to increase as these former new entrant airlines mature.     

A note on the competitive advantage of large hub-and-spoke networks

This note explores the extent to which airlines operating large hub-and-spoke networks secure a competitive advantage. More specifically, this paper explores the intricate relationship which arises among productive efficiencies and profitability when the size of the hub-and-spoke network expands. To this end, Brueckner and Spiller (1991, International Journal of Industrial Organization 9, 323–342) airline economics model is generalized by allowing the size of the hub-and-spoke network to vary. The central result shows that, although the model exhibits decreasing returns to firm/network size (RTNS), nonetheless there is a competitive advantage to increasing the size of a network.     

End of the free lunch? The responses of traditional European airlines to the low-cost carrier threat

The short-haul operations of traditional European airlines such as British Airways and Lufthansa have come under increasing pressure from the growth of low-cost carriers. This paper examines their competitive responses. These are found to include reductions in labour costs, greater use of regional aircraft and a run-down of secondary hubs. Minimum stay requirements on cheap fares have been axed in many markets, while changes to the on-board service and a move to direct-sell bring these airlines closer to the low-cost carrier product. The network strength is largely maintained, however, which appears a better strategy than setting up a low-cost subsidiary.     

An exploratory study into airport choice factors for European low-cost airlines

Low-cost carriers are an increasingly important part of the European aviation industry. Airport choice is a crucial factor in determining their success or failure. While research has been conducted into airport choice factors, their relative rankings have not previously been investigated. This paper addresses this through an exploratory survey of eight European low-cost airlines. The paper finds that demand for low-cost services is the most important choice factor, with aeronautical charges ranked fourth. Further analysis reveals different requirements depending upon airline characteristics. This implies that airport managers need to tailor their service offering to individual low-cost airlines rather than treating the sector uniformly.     

Perspectives on the Development of Low-cost Airlines in South-east Asia

Low-cost airlines are seen by some as one of the best things that have happened within contemporary travel. The clever business idea of offering significantly lower prices by taking out all the extras in a short-haul flight, along with innovative cost-cutting measures, was successful in the USA as early as 1973 when South-west Airlines flew her first low-cost flight. This paper asks whether this scenario has potential in Southeast Asia. According to many analysts, the environment in South-east Asia is simply not suitable for budget carriers. Governments are still very protective of their flag-carriers, there is a lack of cheap, secondary airports, South-east Asians are not wealthy enough to fly, and other cost-cutting measures like Internet distribution cannot easily be replicated. This paper argues that the opposite is true. There might not be 'open-skies' in South-east Asia, but the governments appear willing to nurture low-cost airlines to coexist with their flag-carriers. The number of airports that could serve as gateways for these airlines is more numerous than expected. The South-east Asian population is getting wealthy enough to fly and there also exists a significant market if the low-cost carriers can take advantage of it.     

Entry patterns of low-cost carriers in Hong Kong and implications to the regional market

This study aims to provide a better understanding of Asia's low-cost carriers (LCCs) by empirically analysing their route entry patterns in Hong Kong. Two alternative models have been tested, namely a standard probit model and a generalized least squares estimation. Consistent findings from the two models suggest that LCCs in Asia have a preference for large markets with big populations, high incomes and high traffic volume. On the other hand, the dominance of incumbent full service airlines (FSAs), fierce route competition and the lack of secondary airports are not critical to the growth of LCCs. However, government regulations and airport access are main impediment factors. Despite the adoption of long-distance low-cost models by the region's airlines, geographic distance still plays an important role in LCCs' entry decisions. For the growth of low-cost travel and associated benefits in the tourism industry and overall economy, it is important for governments in the region to liberalize aviation markets, provide sufficient airport capacity, and promote efficient allocation of airport slots.     

The impact of service quality and price on passengers' loyalty towards low-cost airlines: The Southeast Asia perspective

The objective of this study is to examine the impact of service quality by adopting AIRQUAL model and price on passengers' loyalty through the linkage of passengers' satisfaction toward low-cost airlines from the perspective of Southeast Asia. With 200 questionnaires analyzed, the results suggest that service quality and price have a positive significant impact on passenger satisfaction, and as a result lead to passengers’ loyalty. Besides, the findings of this research also confirm the mediating role of customer satisfaction between service quality and loyalty, price and loyalty separately, which implies that customer satisfaction is a vital factor for an LCCs to survive in such a highly competitive aviation market.     

An investigation into traveler preferences and acceptance levels of airline ancillary revenues

This study determines traveler preferences and acceptability levels for a range of airline ancillary products and services by employing an on-line passenger survey to examine booking preferences as well as attitudes toward a selection of air and non-air travel components sold by the airlines. The survey results are combined with expert opinions collated from a recent international conference, along with secondary data, to generate an acceptance ranking which can be used by a range of airlines to formulate their ancillary revenue strategies. It is found that airport car parking and checked baggage charges proved to be the most accepted commission based and unbundled products for airlines to sell respectively. Despite the recent focus and successes in ancillary revenues, however, it can also observed that none of the ancillary products and services examined in this study achieved a high take up rating suggesting that airlines can do much more to convince travelers of the benefit and value in airlines selling non-core products and services to them.     

The effects of corporate governance on airline performance: Production and marketing efficiency perspectives

This study explores the relationship between operating performance and corporate governance in 30 airline companies operating in the US. First, this study applies a two-stage Data Envelopment Analysis (DEA) to evaluate the production efficiency and marketing efficiency of the airlines. Our findings indicate that, in general, there is not as much dispersion in the relative productive efficiencies of the airlines as there is in their marketing efficiencies. The low-cost airlines, on average, are more efficient carriers than the full-service ones, but less efficient marketers. Secondly, truncated regression is used to explore whether the characteristics of corporate governance affect airline performance. The results demonstrate that corporate governance influences firm performance significantly. Finally, we address the managerial decision-making matrix and make suggestions to help airline managers improve performance.     

Are low-cost carrier passengers less likely to complain about service quality?

Complaints made by airline passengers to the U.S. Department of Transportation (DOT) are often used in academic research and in the media as a proxy for the quality of commercial air service in the United States. In this paper, we test whether passengers of network carriers are more likely to make a complaint to the DOT about service quality failures than passengers of low-cost carriers. Through a fixed-effects regression, we find that passengers of low-cost carriers like Southwest Airlines are less likely to complain about service quality than passengers of network carriers like United Airlines, given the same levels of service quality and controlling for yearly fixed effects. This behavior could be explained by price-based expectations of service quality, lack of information about how to complain to the DOT, or qualitative differences in front-line customer service between airlines.     

A tale of airline competition: When full-service carriers undercut low-cost carriers fares

The pricing of low-cost carriers (LCCs) compared with traditional airlines has been extensively investigated since their inception in the air transport market. Abundant empirical evidence attests that, on average, LCCs' fares (per km) are lower than those usually offered by full-service carriers (FSCs). Such literature, however, paid virtually no attention to the conditions under which LCCs lose their convenience compared to traditional airlines. The purpose of this study is to investigate the occurrence of LCCs sometimes offering higher fares than FSCs on competing flights. By using a dataset expressly collected for this purpose, we are able to quantify its frequency and suggest some possible explanations. These findings concur to cast some questions on the widely held preconception of vertical differentiation between LCCs' and FSCs’ offered services. Further research will be needed in order to understand the relative weight of the suggested factors.     

Competitive effects of the airlines-within-airlines strategy – Pricing and route entry patterns

This paper investigates the effects of the airlines-within-airlines strategy adopted by Qantas airline group, which simultaneously runs a full-service airline (Qantas Airways) and a low-cost carrier (Jetstar Airways). Our empirical investigation of airline pricing and route entry patterns in the Australian domestic market suggests that Jetstar has been used as a fighting brand against rival low cost carriers. Such a strategy increases group airlines’ prices at the expenses of rival airlines. There is preliminary evidence that pricing benefits to Qantas Group come from increased market power as well as service quality improvements.     

Exploring characteristics of passengers using traditional and low-cost airlines: A case study of Belgrade Airport

Low cost carriers entered the Serbian air travel market after Serbia joined the European Common Aviation Area (ECAA) in 2006, prompting the development of healthy competition among airlines and resulting in significant traffic increase at Belgrade Airport. The aim of this paper is to examine the characteristics of passengers traveling on low-cost carriers (LCC) in comparison with those traveling on traditional airlines by using cluster analysis, and to provide practical implications to airport management in tailoring their strategies to meet growing demand. A comprehensive passenger survey was recently conducted at Belgrade Airport on the routes where competition between traditional and LCC carrier exists. The results reveal that emigrants, primarily encouraged by favorable fares, constitute a substantial portion of LCC passengers. Affordable service offered by LCC has also been a positive stimulus for emigrants, who purchase tickets for their friends and relatives to visit them in their host countries. On the other hand, passengers using traditional airlines could be generally classified into two segments, those who fly on business and those who fly for leisure purposes, and each had specific needs when choosing their airline.     

The influence of greening the suppliers and green innovation on environmental performance and competitive advantage in Taiwan

Recently, many companies have recognized the concepts of green supply chain management or supply chain environmental management. However, relatively little research attention has been devoted to the consideration of relations between greening the supply chain, green innovation, environmental performance and competitive advantage. Hence, this paper aims to bridge this gap by providing empirical evidence to encourage companies to implement green supply chain and green innovation in order to improve their environmental performance, and to enhance their competitive advantage in the global market. A model is constructed to link the aforementioned constructs. Data were collected through a questionnaire-based survey across 124 companies from eight industry sectors in Taiwan. The data are analyzed using Structural Equation Modeling and the results from the final measurement model are used to evaluate the structural model that verifies the significance of the proposed relationships. A prominent result of this study is that greening the supplier through green innovation contributes significant benefits to the environmental performance and competitive advantage of the firm.     

Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression

Between 2001 and 2005, the US airline industry faced financial turmoil while the European airline industry entered a period of substantive deregulation. Consequently, this opened up opportunities for low-cost carriers to become more competitive in the market. To assess airline performance and identify the sources of efficiency in the immediate aftermath of these events, we employ a bootstrap data envelopment analysis truncated regression approach. The results suggest that at the time the mainstream airlines needed to significantly reorganize and rescale their operations to remain competitive. In the second-stage analysis, the results indicate that private ownership, status as a low-cost carrier, and improvements in weight load contributed to better organizational efficiency.     

The relationship between airline performance and corporate governance amongst US Listed companies

The paper explores links between the operating performance of 30 airlines in the US and corporate governance. Initially data envelopment analysis is used to assess the relative efficiency of airlines and to investigate the contribution of inputs and outputs that affect technical efficiency. Efficiency decomposition combined with cluster analysis and multidimensional scaling is used to explore competitive advantage of airlines. Finally, the question of whether or not corporate governance affects the airlines’ performance is examined.     

Hello major airports,goodbye regional airports? Recent changes in European and US low-cost airline airport choice

Low-cost carriers (LCCs) are assumed to adopt a certain business model in which an important element is the concentration of services at secondary and regional airports. Yet, evidence suggests that increasingly LCCs also establish themselves in what can be considered the major airports. This raises the question of whether LCCs are changing their business model and adopting practices associated with the traditional, incumbent airlines, and if so what might cause such change. Based on categorization of airports and using OAG flight data the US and European markets are investigated. Focusing on several LCCs, with more attention given to Southwest and Ryanair, their profile of operation with respect to the type of airports used is analysed for a period of between 15 and 25 years and up to 2015. The results clearly indicate that LCCs are increasing their operations from major airports, while generally continuing their growth and expansion strategy. The main implication of which is the increase in direct competition between LCCs and traditional airlines while the impacts of this change on the smaller airports are not clear yet and need to be investigated further.     

Race to the bottom or swimming upstream: Performance analysis of US airlines

Data envelopment analysis is used to examine inter-temporal and peer group airline efficiency. Results for the US for 1985–2006 indicate that airline performance is converging over time. In particular, airlines inter-temporal inefficiency peaked earlier and then converged. Furthermore, using Tobit specifications it is seen that while demand intensity matters less in determining airlines inter-temporal inefficiency, their influence is stronger in determining peer group inefficiency. Block time, a representative of operational factors, tends to negatively impact airlines efficiency by imposing burdens on airline operations. Among the structural cost and revenue factors, fuel cost tends to affect inter-temporal inefficiency more robustly than it does to peer group efficiency. Labor pay tends to reduce inefficiency in case of inter-temporal while increasing peer group inefficiency. The events of September 11th had little or no impact on inter-temporal inefficiency but tended to reduce peer group inefficiency in a significant way. Finally, airlines efficiency tends to be robustly affected by block hours; reducing them increases efficiency.