Benchmarking the performance of Chinese airlines: An investigation of productivity,yield and cost competitiveness

In the past decade, the Chinese airline industry experienced extraordinary growth in size and profitability. However, no quantitative study has investigated the performance of Chinese airlines in terms of productivity and cost competitiveness. This study investigates the leading Chinese airlines' productivity, yield, cost competitiveness and input prices, and benchmarks them against major airlines around the world. It finds that Chinese airlines' productivity has improved significantly in the past decade but still lags behind that of industry leaders. Chinese carriers enjoyed high yields and low input prices in the domestic market, which led to high profitability in recent years. However, their cost advantage has been diminishing. To sustain long-term growth, Chinese airlines need to adopt the industry's best practices in a timely manner. Both the aviation markets and input markets in China should be further liberalized.     

Government support to airlines in the aftermath of the COVID-19 pandemic

This paper assesses government support measures to the air transport sector following the outbreak of the coronavirus disease (COVID-19) pandemic from two points of view. First, it explores the factors that shape governments’ willingness to support airlines. This is followed by a discussion on the various types of support that may be provided and how country-specific parameters influence the choice of measures. Second, it analyses the implications of government support in three dimensions relevant to air transport policy: competition and liberalisation, airline ownership and control, and environmental sustainability. The analysis suggests that most governments give a high priority to maintaining air transport connectivity in order to protect economic activity and jobs, in aviation itself and in related sectors such as tourism. The trade-off between ensuring connectivity and maintaining competition after the COVID-19 pandemic is a challenge with several political and economic dimensions. The re-orientation of public policy in the aftermath of the pandemic may limit the relative importance of the policy priorities that shaped the evolution of the air transport sector before the crisis, especially those related to climate change and the environment. The role of government and public authorities at all levels – especially the type and duration of measures affecting transport operations – will be crucial for the future development of the aviation industry.     

Efficiency of US airlines: A strategic operating model

This paper applies the unoriented DEA network methodology to measure US airlines' performance relative to that of peer airlines and identifies the sources of its inefficiency. The analysis of the results suggests that major US airlines are more efficient than national US airlines in spending operating expenses and gaining operating revenue, but there is no significant difference in their service supply and demand efficiencies.     

Multi-period efficiency and productivity changes in US domestic airlines

This study tracked the static efficiency and dynamic productivity changes of 14 US airlines from 2006 to 2015. Moreover, we estimated the principal economic drivers of the environmental variables to increase the US domestic airlines' efficiency using the double bootstrap regression analysis. The major aspects of this study are as follows: First, network legacy carriers have the highest efficiency, whereas low-cost carriers are lowest. Nonetheless, network legacy carriers still have room to improve scale inefficiency. Second, the fluctuations in technical change, rather than in efficiency change, tended to have greater effect on the fluctuation of Malmquist productivity index for US domestic airlines. Third, M&A between US airlines have both positive and negative effects in terms of efficiency and economies of scale. Fourth, cost environmental factors have a negative effect on US airlines' efficiency, while revenue factor is a positive effect. The results of this study may help US airline industry practitioners to understand the US domestic airline environment from an operator's perspective.     

Market opportunity analysis and evaluation of the expansion of air transport services across the Taiwan Strait

Air transport services across the Taiwan Strait are rapidly developing. Taiwanese airlines are therefore facing a critical decision as to whether to expand their scheduled services beyond saturated markets. The Taiwanese government is also concerned regarding airline operators' willingness to enter new markets for next-round negotiations concerning traffic rights. This study proposes an Analytic Hierarchy Process (AHP) framework for Taiwanese airlines based on a market opportunity analysis (MOA) to evaluate the determinants of potential service expansion. A novel rank pair-wise comparison (RPC) is used to measure the relative weights among determinants. It is found that service provision for Taiwanese merchants is the most vital factor. Flight quotas and allowed time slots also affect airlines' willingness to expand operations. Other determinants depend on the individual airlines' development background and operating size. This study also evaluates twelve airports in mainland China using grey relational analysis (GRA) to rank the entrant priorities for additional scheduled services.     

The impact of carbon emission fees on passenger demand and air fares: A game theoretic approach

The implementation of an environmental market-based measure on U.S. aviation industry is studied. Under this policy, each airline pays a carbon fee for the carbon dioxide emissions it generates. The impact on ticket prices and corresponding market shares is investigated via the joint estimation of an air travel demand model and an airlines' behavior model. In the demand model, aggregate air traffic data is used to determine the marginal effects of flight attributes that are specific to itinerary, airline and airport on market share. The airline's behavior model incorporates the carbon fee in the airline marginal cost. After the implementation of the carbon policy, the increased cost forces airlines to adjust ticket prices in order to maximize profits. The results obtained by the proposed model indicate a moderate price increase which strongly depends on the per tonne carbon price. Air travel demand falls from 2.4% to 21% depending on the carbon price level.     

Liberalization of China–US air transport market: Assessing the impacts of the 2004 and 2007 protocols

This paper examines China's considerations in reaching the 2004 and 2007 Air Service Agreement Protocols with the United States (US) and the impacts of such policy on the China–US market from the perspective of China. Analysis shows that the 2004 and 2007 protocols have profound impacts on the China–US market. The two protocols have been associated with phenomenal traffic growth and intensified competition. Passengers also benefit from much more choice in terms of both airlines and routing. Over time, Chinese carriers' operating performance and financial performance have gradually improved after the liberalization expressed in the protocols. However, the industry's hub-building initiatives are still seriously challenged by competing hubs in Seoul and Tokyo which have diverted substantial number of passengers moving between the China and US markets. Such issues have to be addressed in order to create a win–win outcome for both countries.     

Post pandemic aviation market recovery: Experience and lessons from China

China was the first aviation market in the world hit hard by COVID-19 and has been recovering gradually as the pandemic became largely under control within mainland China. This study reviews the recovery pattern influenced by the Chinese government's aviation policy choices, in the hope that our discussions and findings will help improve aviation policy responses elsewhere. While the domestic market in mainland China has enjoyed a quick recovery to about 80% of the pre-crisis level by July 2020, the recovery of international services has been much slower, due to the bilateral route and flight frequency/capacity control and strict requirements for health check and quarantine. China's domestic aviation market was recovered by about 80% in two months after the pandemic became under good control. Most other countries with a “curve flattening” strategy, instead of full pandemic control, may not expect the fast recovery path China has achieved. A British “travel corridor” approach may be more practical for Western countries to follow, albeit more likely to be subject to serious setbacks and disruptions. The aviation fee reductions and cost support China and many other countries have been using are helpful by reducing airlines' marginal costs, but not sufficient for carriers to return to profitability or sustainable operations. Capital injection and/or credit guarantee may be needed for many airlines to survive. With various, often uncoordinated, regulations imposed in international markets, airlines based in open economies that have small domestic markets will face particularly serious challenges during the recovery process.     

What are passenger perspectives regarding airlines' environmental protection? An empirical investigation in Taiwan

Many airlines recognize the importance of environmental protection. The airlines implement a number of environment-friendly activities related to in-flight services and wish to trigger passengers' support and therefore inquire as to their preferences. Because these activities are not identical between airlines, it is not known which items are actually supported and which items are opposed. In this paper, major airline environmental protection activities were collated, and the Smart partial least square software was used to analyse data from 442 passengers who have experienced air travel in the past 3 years. The results showed that in general, passengers would prefer to choose airlines that supported environmental protection activities. However, several activity items would be rejected if passengers felt their rights or interests being compromised. It was also indicated that people from countries at different stages of economic development had varying preferences regarding their support of airlines' environmental protection activities, and the young generation had more concern about environmental protection than others. The findings of this research could be beneficial for airlines setting up their differentiated marketing strategies for enhancing both environmental protection efforts and business performance.     

Promoting passenger comfort and wellbeing in the air: An examination of the in-flight health advice provided by international airlines

Cases of airline passengers developing deep vein thromboses and contracting infectious diseases during flights have led to airlines' provision of in-flight customer health advice coming under increased scrutiny. By means of a manifest content analysis of the information provided in 50 international airlines’ in-flight magazines, this paper examines the nature and presentation of the health advice that is supplied and comments on the different approaches individual airlines adopt.     

Eco-positioning of airlines: Perception versus actual performance

To date there has been little research in air transport into the eco-positioning of airlines, that is, their environmental image relative to other airlines and how actual environmental performance relates to this eco-positioning. This paper identifies the environmental perceptions that passengers hold of twelve airlines and relates these perceptions to airlines' actual environmental performance, using load factors, aircraft age and the atmosfair Airline index as proxies for environmental performance. Based on a survey of over 600 passengers at Liverpool John Lennon Airport, the research analyses air travellers' perception of airlines from an environmental perspective. The results show that while there are significant differences in people's environmental perception of airlines, the eco-positioning of the airlines is not correlated to their actual environmental performance. The results support previous research findings in other industries that in many cases actual performance is less important than communicating environmental messages to the public in creating a superior eco-positioning.     

Paternalistic leadership and cabin crews’ upward safety communication: The motivation of voice behavior

Being the frontline operators in the airline industry, flight attendants constantly obtain and collect first-hand information from their interactions with passengers and other crew members. Their experiences and observations may contribute greatly to airlines' safety management and policy making. It is thus critical to learn how to enhance cabin crews' voice behavior, particularly communicating safety related issues upward through specific leadership styles. The current research aims at the flight attendants working for Taiwanese international airlines. The cabin crew department managers' paternalistic leadership style is adopted to observe how it may trigger cabin crews' different types of voice behavior. This research addresses the following two major questions: 1. What is the motivation for cabin crew to conduct upward safety communication? 2. How does department managers' paternalistic leadership style impact cabin crew's voice behavior? Regression analysis is used to analyze the empirical data collected by the questionnaire survey. The results are applied to provide airlines with practical references for constituting human resource management policies, and the findings also enhance existing literature regarding management applications and employees voice behaviors.     

Exploring the impacts of employee advocacy on job satisfaction and organizational commitment: Case of Taiwanese airlines

The accessibility of information through the Internet has enables flight attendants to become more informed, as well as developing more control of their own affairs. Employee advocacy is related to the transparency of airlines' employment offers and the airlines' willingness to do what is best for their employees. After reviewing the relevant literature, this study focuses on how employee advocacy is influenced by the way employees are treated by their airlines. We explored strategies that airline administrations apply to employee advocacy, developed a research setting, analyzed the factors involved, and developed a casual model of the antecedents and consequences of employee advocacy. We formulated 5 hypotheses. Data were collected, using a questionnaire survey of flight attendants in Taiwanese airlines. All hypotheses were verified with data from a sample of the respondents, by using a structural equation model. Our results indicated that employee advocacy is positively related to flight attendants' job satisfaction and commitment to the organization. Organizational innovation, supervisor support, and employee empowerment are positively related to employee advocacy. Finally, this study concludes by discussing managerial implications and providing suggestions for future research.     

The carbon emissions of selected airlines and aircraft types in three geographic markets

Various carbon calculators developed by airlines and carbon offset companies have become available since the environmental impact of the air transport industry started to receive strong attention. This paper details a prototype methodology for carbon calculation emission levels in the three air transport markets; the UK domestic routes, the intra-EU routes serving UK and the North Atlantic routes that enables the assessment of key environmental performance differences between air carriers whereas they would be measured as identical using the often used DEFRA-type measurement approach. The results show differences in airlines' strategies such as aircraft type used, load factors and seat configurations.     

An analysis of the greenhouse gas emissions profile of airlines flying the Australian international market

International commercial flights (with the exception of flights between countries in European Union including Iceland, Norway and Liechtenstein) are currently not subject to greenhouse gas emission reduction regulation. To formulate effective and efficiency policy to manage greenhouse gas emissions from air transport, policy makers need to determine the emissions profiles of all airlines currently flying into their country or region. In this paper, we use 2012 data on airlines' aircraft characteristics, passenger load and cargo load (obtained from statistics reported by Australian Government Bureau of Infrastructure, Transport and Regional Economics) to estimate the volume and carbon efficiency on each international route flying to and from Australia. This is the first study to use actual passenger and cargo load data to determine the greenhouse gas (specifically CO₂) efficiency of airlines operating in the Australian international aviation market. Airlines' CO₂ emission profile is dependent on many factors including but not limited to the aircraft used, payload, route taken, weather conditions. Our results reveal that the airlines’ CO₂ emission profile is not only dependent on the aircraft used and the number of passengers but also the amount of cargo on each flight.     

The future of airports post COVID-19

COVID-19 pandemic has hit most sectors of the world and has led to many industries coming to a standstill. It has led to restrictions of movement and travel ban. As a result of these restrictions, transport sector especially in aviation has impacted badly.With the uncertainty of further impact of the current situation, there is a likelihood of the aviation business rebounding at a slower pace bringing V-shape and U-shape recovery as per analysis of economic impacts on civil aviation by International Civil Aviation Organization (ICAO (2020). Currently, airline capacity is down 70 to 80 percent in April 2020 compared to April 2019, and multiple large airlines have temporarily ceased operations. Largely, almost 60 percent of the global fleet was grounded in early April 2020 as per McKinsey report (Curley et al., 2020).In order to support the sinking capacities and revenues, the International Air Transport Association (IATA) calls on the European governments to provide relief to their airlines to sustain their operations. Furthermore, this document highlights the future of airport and air transport industry based on revenue generation sources, cost control strategies and integration of innovations with respect to variable demand and capacity during and post COVID-19.     

Booking and flying with low‐cost airlines

The first part of the paper develops a theoretical framework for the analysis of strategic behaviour of European low‐cost airlines that emphasises the role of product differentiation. The second part uses original survey data to assess the effectiveness of low‐cost airlines' distribution strategies. Finally, an econometric model is developed to assess the joint impact of the factors affecting the level of the fares charged by low‐cost airlines. The evidence suggests that, among other things, the highest prices normally are paid for tickets bought between 30 and 8 days before departure, and thus indicates an original pricing strategy that differentiates low‐cost airlines from traditional carriers. Copyright © 2002 John Wiley & Sons, Ltd.     

The carrier-within-a-carrier strategy: An analysis of Jetstar

The carrier-within-a-carrier (CWC)—or “airline-within-an-airline” (AWA)—approach has become an integral part of many airlines' marketing strategies in the Asia–Pacific region where several full-service national airlines operate low-cost/low-fare subsidiary airlines. The CWC approach is a response to competition from low-cost carriers based on product differentiation, i.e., a ‘two brands’ business strategy aimed at defending market share. Most CWCs were established after 2001 as a response to deregulation and liberalization and generally adhere to the principals of low-cost/low-fare carriers. Typically, CWCs enter markets through new, point-to-point services and operate short-haul routes (one-to 2-h flying times) that might have been abandoned by full-service airlines (FSAs), whereas at other times they simply compete directly with FSAs on price. This paper analyses Jetstar, a subsidiary of Qantas, which has transitioned from a domestic CWC to an international medium- and long-haul carrier. In addition to its domestic Australian operations, Jetstar operates between Australia and the Asia–Pacific region and has established partnership arrangements operating within Asia, including Jetstar Asia (based in Singapore), Jetstar Vietnam and Jetstar Japan. Jetstar also has operations in New Zealand. The theoretical framework applied in this paper is based on the strategic windows concept, in which opportunities arise and a window opens, and Tregoe and Zimmerman's (1980) ‘driving forces’ model, in which nine attributes are listed and certain of these are exemplified by Qantas' strategy. The methodology adopts a case study approach that draws upon content analysis and ‘events in the making’ and features interviews with key respondents. The findings show that Jetstar disproved earlier criticism of the CWC strategy and further demonstrate that by careful planning, strategy and execution, Jetstar has been able to grow its capacity, maintain high load factors, increase revenue and (more importantly) increase profitability at a time when many airlines are consolidating or withdrawing services because of losses.     

Assessing the air cargo business models of combination airlines

Notwithstanding the fact that the air cargo business is generally a secondary one to the passenger business for combination airlines, it can have an important role to play in their profitability. However, growing challenges are threatening the market positions of the combination airlines. Improving their market positioning depends, amongst other factors, on appropriate business models. Yet, the literature on the air cargo business models of combination airlines is scarce. This paper aims to contribute to closing this gap.The research presented herein aimed to identify the representative business models of the combination airlines' cargo strategies. Three strategies have been considered. The research method included a series of structured interviews with key informants from combination airlines, namely: TAP Cargo, Brussels Airlines Cargo, SATA Cargo, Turkish Cargo, SWISS WorldCargo, Finnair Cargo, AF-KLM Cargo, Emirates SkyCargo, Lufthansa Cargo and IAG Cargo.The ten air cargo business models and the representative business models of each strategy are described. The results suggest an overlap between the business models of different strategies. In addition, the results show that an evolution in strategy does not necessarily require a redesign of the business model, but tailored changes in specific components.     

The economic approach to subsidies for foreign airlines

Many air carriers have challenged each other's financing arrangements, each asserting that the other benefits from substantial subsidies. We argue that the ‘subsidy’ classification is a distraction. Firstly, subsidies are quite difficult to define. Secondly, subsidies are little different in their economic effects to many other policy actions, and should be evaluated by policymakers similarly to these other measures. An economic approach would be to assess whether, in overall cost-benefit terms, a country is harmed by subsidies received by another country's airlines. Even if home airlines lose out, home passengers will gain, and the balance will often be positive. The paper outlines the circumstances under which a country would gain or lose from a subsidy to a foreign airline.