Spatial and operational factors behind passenger yield of U.S. nonhub primary airports

Nonhub airports are an essential component in the National Plan of Integrated Airport Systems (NPIAS) of the United States in that they connect regional towns and small communities to the air transportation network. Understanding the interplay of operational and spatial factors in determining average passenger yield of nonhub airports provides airlines with valuable information for network planning and revenue management. This study examines factors contributing to the yield variation among nonhub airports in the U.S. Using ordinary least squares (OLS) based econometric models, this study captures the spatial dependence of passenger yield of nonhub airports, which tends to increase with a corresponding increase in distance to the nearest large hub airport. Nonhub airports surrounding large hub airports with higher passenger enplanements and higher average yields also have higher yields than other nonhub airports. In addition, this study finds the effect of Allegiant Airlines in lowering the average passenger yield of the nonhub airports served directly by the airline, which can be termed as ‘Allegiant Effect’. Findings of this study could provide valuable guidance for airlines to analyze network planning strategies and to identify future markets for growth and for policymakers when allocating resources to communities relying on these nonhub airports.     

The emergence and effects of the ultra-low cost carrier (ULCC) business model in the U.S. airline industry

The effects of “low cost carriers” (LCCs) such as Southwest Airlines and JetBlue Airways on the competitive landscape of the U.S. airline industry have been thoroughly documented in the academic literature and the popular press. However, the more recent emergence of another distinct airline business model—the “ultra low cost carrier” (ULCC)—has received considerably less attention. By focusing on cost efficiencies and unbundled service offerings, the ULCCs have been able to undercut the fares of both traditional network and low-cost carriers in the markets they serve.In this paper, we conduct an analysis of ULCCs in the U.S. aviation industry and demonstrate how these carriers' business models, costs, and effects on air transportation markets differ from those of the traditional LCCs. We first describe the factors that have enabled ULCCs to achieve a cost advantage over traditional LCCs and network legacy carriers. Then, using econometric models, we examine the effects of ULCC and LCC presence, entry, and exit on base airfares in 3,004 U.S. air transportation markets from 2010 to 2015. We find that in 2015, ULCC presence in a market was associated with market base fares 21% lower than average, as compared to an 8% average reduction for LCC presence. We also find that while ULCC and LCC entry both result in a 14% average reduction in fares one year after entry, ULCCs are three times as likely to abandon a market within two years of entry than are the LCCs. The results suggest that the ULCCs represent a distinct business model from traditional LCCs and that as the ULCCs grow, they will continue to play a unique and increasingly important role in the U.S. airline industry.     

The pain persists: Exploring the spatiotemporal trends in air fares and itinerary pricing in the United States, 2002–2013

In the United States, the Airline Deregulation Act of 1978 prompted higher levels of service frequency between large and/or popular markets, lowering associated fares, on average. However, deregulation also increased financial instability within the commercial air transport industry, reduced quality of service, increased passenger fees and accelerated changes in the operational configurations of networks through hubbing, dehubbing, mergers and acquisitions. Over time, these market forces have squeezed service to/from smaller communities through schedule reductions and higher fares, creating “pockets of pain” in the air transport landscape. The purpose of this paper is to explore the uneven spatiotemporal distribution of air fares, by airports and associated flight segments, examining both symmetries and asymmetries in fare patterns over time and across space. Results suggest that several significant pockets of pain still exist within the U.S., and that asymmetries in air fares creates a lopsided fare structure for many smaller markets, further aggravating the fare imbalances spawned by deregulation.     

Revenue and operational impacts of depeaking at U.S. hub airports

Historically, peaked schedules have been used with hub-and-spoke networks to maximize passenger connection opportunities. Although peaked schedules can generate more attractive connecting itineraries and revenue for an airline, they are costly to operate because additional manpower and equipment resources are needed to serve the peak periods. Several airlines experimented with depeaking their hubs as a way to reduce costs and improve operations in the 2000s. Prior studies have quantified operational improvements and cost savings associated with depeaking; however, none have quantified revenue impacts. We use difference-in-differences methods to quantify revenue and operational impacts associated with depeaking for five U.S. hubs. Results show that depeaking tends to improve operations, but may negatively impact revenue per available seat mile (RASM). In some cases, revenue losses exceed reported cost savings.     

Impacts of LCC growth on domestic traffic and fares at largest US airports

This paper examines the evolution of domestic origin-destination air traffic and fares at the top 200 airports in the US between 1990 and 2008, with a focus on the impacts of low-cost carrier entry and growth. By 2008, 95 of the airports had an aggregate low-cost carrier market share of domestic traffic greater than 20%, up from 27 airports in 1990. Their entry or substantial growth at US airports has had significant impacts on lowering average fares and stimulating passenger volumes. This market stimulation effect has, however, diminished in recent years, as the difference in average fares between carrier types has narrowed and as the number of additional US domestic origin-destination markets able to support their entry has dwindled.     

The impact of low cost carriers on Korean Island tourism

Given the mixed findings of extant research on the impact of low-cost carriers (hereafter LCC) on aviation markets (with some studies showing stimulation of new demand, other studies showing LCCs encroaching on the turf of full-service carriers), the emergence of LCCs in Korea raised an interesting question as to whether or not they actually contribute to overall growth in domestic air traffic. The literature has paid limited attention to this issue so far. Employing a multivariate regression analysis with monthly data from 2000 to 2009, the impact of LCCs on tourism demand to a popular destination in Korea, Jeju Island, is examined, focusing on two specific questions: Have LCCs generated new tourism demand and brought more tourism revenue into the island’s economy? Have LCCs mitigated tourism seasonality on the island? Controlling for the effects of a number of factors, results showed that LCCs have generated new demand in addition to existing tourist flows to the island. Korean LCCs accounted for 35% of total passengers in 2009, which indicates an average growth rate of 161.7% over the last 4 years, compared to a −0.3% growth rate for all full-service carriers in Korea. However, LCCs seem to have had little impact on reducing seasonal fluctuations in passenger traffic to Jeju Island. The findings of this study will be of interest to researchers, policy makers, and a variety of stakeholders in the tourism industry interested in the relationship between no-frills airlines and island economies.     

The evolving landscape of Chinese aviation policies and impact of a deregulating environment on Chinese carriers

This paper examines the recent developments of China’s aviation polices focusing on airline consolidation, the opening up of the domestic aviation market, and the adoption of more liberal international aviation policy. It then goes onto assess the impacts of the above policies on the industry structure, the performance of major airlines, and the competitiveness of Chinese airlines in international markets. The study shows that the industry became more competitive following the opening up of the domestic aviation market. Although major airlines saw an increase in passenger volume and an improvement in load factors, the falling yield and rising costs make them difficult to grow profitably. Moreover, Chinese airlines largely failed to capitalise on building an international network and the majors were weak in international competition. Strategic use of aviation policy to build a strong and profitable airline industry is still a formidable task lying ahead for policymakers.     

基于路网规划的铁路旅客出行路径选择研究简

价格策略对于铁路客运专线实现可持续经营发展具有重要意义。从收益管理的基本思想和方法入手,借鉴收益管理在航空业和欧洲铁路的成功应用经验,分析我国现行的铁路客运专线价格体系存在的问题,提出我国铁路客运专线应该采取的价格策略,以促进客运专线经营水平和市场竞争能力的提高。     

An empirical analysis of Canadian international air policy: effects of dual carrier designation and partial liberalization

This paper assesses the impact on air traffic of Canada's policy of allowing two Canadian flag carriers (dual-designation) to operate in select Canadian international markets. The secondary objective is to assess the effect of Canada's partially liberalized bilateral air services agreements. Using panel data covering Canada's 33 bilateral markets over the 1982–1994 period, we find the following results: (a) dual designation/operation of Canadian carriers in a country-pair market increases total traffic volumes in the market as well as increases the combined passenger volume and market share of Canadian carriers, and (b) Canada's partially liberalized bilateral air services agreements have significantly increased air traffic in those country-pair markets.Two policy implications follow from this research. First, Air Canada's recent merger with Canadian Airlines is expected to have a significant negative impact on total traffic volumes as well as on Canadian carrier traffic volumes and market shares on the country-pair markets both Air Canada and Canadian served previously. Second, not only the US style full liberal bilaterals or open skies, but also partial liberalization of bilateral markets Canada adopted appears to generate consumer welfare benefits.     

Supporting the needs of special assistance (including PRM) passengers: An international survey of disabled air passenger rights legislation

Passengers who require special assistance at airports and on aircraft represent one of the fastest growing demographics for aviation worldwide. At some airports, annual growth in PRM (persons with reduced mobility) traffic is six times greater than the overall rate of passenger growth yet barriers to accessible air travel remain and disabled passengers continue to exhibit a lower propensity to fly than other travellers. In an attempt to aid disabled passengers’ accessibility to air travel, countries have introduced dedicated air passenger rights and consumer protection legislation which seeks to specifically address the needs of disabled travellers. These regulations typically state minimum service standards and levels of service provision that must be provided by air transport operators to enable disabled travellers to access air travel on an equal basis to other passengers. These legal interventions, however, have been developed on a country-by-country basis and this has created a lack of international regulatory alignment. This paper reports on the findings of an international survey of disabled air passenger rights legislation in 47 countries covering 20 aviation markets (the single market in the European Union and 19 other States). It identifies the differences in regulatory frameworks, highlights their implications for consumers and ultimately concludes by recommending the formation of more harmonised global policy making to better support the needs of special assistance passengers and facilitate their greater mobility by air.     

Locational determinants of major US air passenger markets by metropolitan area

The paper examines the influence of metropolitan characteristics in determining the locations of major air traffic markets in the US. In general, the likelihood of a major air passenger market locating in any given metropolitan area is primarily determined by the metropolitan area's population size and overall propensity for air travel. The study shows that on average, a major air passenger market has over 3 million people while a minor market has a population base of about 760,000. The propensity of a population to fly is mainly a function of a number of social and economic indicators, the most important of which was found to be employment in professional–scientific–technical services and management activities.     

The geography of air freight: connections to U.S. metropolitan economies

Despite the rapid growth of air freight shipments, much of the existing literature on the geography of air transportation has paid more attention to passenger travel than air freight. The purpose of this paper is to elevate our understanding of air freight by determining which specific variables most influence and shape the geographic distribution of air freight by metropolitan area using stepwise regression analysis. The empirical results suggest a regression model of five independent variables was the most parsimonious solution where the final model accounted for 71.1% of the variation in air freight shipments by metropolitan area (MA). The most important predictor was the traffic shadow effect, where less populated MAs under the traffic shadow of larger MAs tended to generate lower levels of freight. The model also suggested that other key predictors included the employment market share in transportation-shipping-logistics industries, per capita personal income, the number of medical diagnostic and supplier establishments, and above average wages in high technology. Overall, metropolitan markets with diverse and efficient ground support systems, freight forwarders and other transportation services, a more affluent population, an intense agglomeration of medical laboratories and related suppliers, and a well paid skilled workforce engaged in computer systems design and electronic product manufacturing are more likely to ship freight by air.     

旅客列车开行方案系统的开发研究

铁路旅客列车开行方案的确定涉及因素较复杂,研究开发旅客列车开行方案系统,以路网旅客OD流量为依据,得到开行方案的初步优化方案,然后根据实际情况进行相应调整,通过对列车进行点到点的技术经济评价,最终确定合理的旅客列车开行方案,有效提高市场经济条件下客运决策的效率和水平。     

The effect of LCCs operations and scheduled services deregulation on air charter business in Japan

Recent aviation deregulation is producing structural changes within leisure industries in many parts of the world. This paper reviews the development of low cost carriers (LCCs) and assesses its effects on both of domestic and international charter markets in Japan since 2007. Furthermore, this paper analyzes the effect of scheduled services deregulation on international tourism to Japanese regional areas in relation to charter services. The results suggest that in the domestic market, LCC operations have seldom impacted charter traffic due to the differences in target markets and routes. In the international market, LCCs launched scheduled services to Japan but mainly on high demand routes. The deregulation of scheduled services led to a passenger shift from charters to newly scheduled flights and a concentration of tourist arrivals in regional centres. It also led to a decline in international tourist arrivals in some remote destinations. This paper indicates a current trend in which charter business is still an important sector in aviation and leisure markets.     

Investigating the effects of economies of scope on firms’ pricing behavior: Empirical evidence from the US domestic airline industry

This study investigates to what extent cross-product (belly cargo) output affects (passenger ticket) prices in the US domestic airline industry. The empirical analysis indicates that greater cargo volumes generally result in lower air fares, presumably as a result of the airlines’ realization of economies of scope. This magnitude of this price effect, however, depends on certain firm and route market characteristics. The findings of this study add to extant research on economies of scope, multi-product yield management and airline pricing and provide important insights for policy makers and airline managers alike.     

高速铁路柔性时刻表编制研究

随着新兴信息技术与交通的不断融合发展,需求响应型交通已成为未来交通发展的新模式,而柔性时刻表编制问题是决定这一新模式能否在高速铁路应用的关键问题之一。基于旅客预约条件下的需求响应型高速铁路柔性时刻表编制问题,提出完全柔性和部分柔性2种编制模式,构建同时考虑列车开行收益和旅客平均偏差时间的双层优化模型,设计模拟退火算法求解,以厦深高速铁路为例进行案例分析。研究结果表明,柔性时刻表编制模型求解得出的时刻表能够较好地匹配旅客预约的出行时间,有效满足旅客预约需求,提高运营收益,对未来需求响应型高速铁路具有一定参考价值。     

Determinants of de novo new entrant survival in the liberalized intra-European scheduled passenger airline industry

This paper analyzes semi-parametrically the survival odds of de novo entrants in the liberalized intra-European scheduled passenger airline industry with respect to three sets of determinants: strategic positioning, inaugural market entry and network economics. Among these determinants, a ‘low-cost’ strategic position does not confer survival benefits to new entrants. Entering markets with different levels of prior concentrations – which economists traditionally relate to different pricing powers – does not significantly affect the survival odds of new entrants. Entering mid-sized markets adversely affects entrant survival, while entering large, small or new markets at inception does not noticeably impact entrant survival. Network economics that corresponds to low operating costs (aircraft size) is a consistent contributor to entrant survival. In addition, new entrants based in France or Ireland are less likely to survive than others, reflecting the strong negative impact of intermodal competition and a strong, entrenched entrant.     

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.     

‘Africanisation’ of South Africa’s international air links, 1994–2003

In the first decade of democratic rule in South Africa scheduled commercial passenger flights across the country’s borders more than doubled. Additional flights served new African air passenger markets and secondary airports in established markets. Overseas flights increased more slowly, serving a diminishing number of overseas countries and cities. In 1994 the Republic was linked directly by air with more overseas than African countries and cities; within a decade the pattern reversed. The changing geography of South Africa’s international air links reflects developments in the international airline industry, and South Africa’s increasingly prominent political and commercial role in Africa.     

Air cargo alliances and competition in passenger markets

This paper develops an oligopoly model to investigate the effect of an air cargo alliance on competition in passenger markets. We consider a model in which the partners, while continuing to offer their respective passenger services, jointly offer a new integrated cargo service by utilizing their passenger aircraft and routes. We find that such an alliance will likely increase the partners’ own outputs, while simultaneously decreasing its rivals’ outputs, in not only the cargo market but also the secondary passenger market. Furthermore, the alliance is likely to reduce passenger prices and increase total surplus.