The effects of China's airline mergers on prices

This paper looks at the effects of some of the recent airline mergers in China. Overall, no significant airfare increases are found in a sample of markets served by the merged China Eastern and China Southern after 2002; indeed in most of the markets directly affected airfares declined. This was despite the absence of antitrust laws and enforcement over the period. However, market power was possibly exercised after the mergers in China Eastern's hub-to-hub networks.     

Airframe manufacturers: Which has the better view of the future?

For the development of Airbus’ A380 and Boeing's B787 it seems that these manufacturers have differing views of future airline networks. This paper assesses from published sources the likely preferences of leisure and business passengers for different airline network approaches and also assesses airline strategies through the economic cycle. The manufacturers seem to have substitutable aircraft types. Both leisure and business travellers are increasingly price elastic and growth in both markets means both aircraft type will be successful aircraft meeting differing needs. However, airline market-share strategies are likely to undermine the success of hub by-pass or hub-to-hub focus strategies throughout the cycle.     

Airline alliances: cooperating to compete?

This paper examines the formation of alliances in the contemporary airline industry, comparing this with developments in business collaboration in industry generally. It identifies the main forces driving airlines into alliances, before considering the strategies that airlines are adopting in marketing joint services, and the policies that governments are pursuing in relation to the impact of alliances on the intensity of competition. One of the main arguments advanced is that alliances increase competition in through-markets via hubs, and that they can be expected to have pro-competitive effects in narrowing price-cost margins on long-haul services, something that can be traded against any lessening of competition in short-haul hub-to-hub markets.     

Assessing the price effects of airline alliances on parallel routes

The impact of airline alliances on airfares on nonstop hub-to-hub routes is investigated. Analytical results suggest that the net effect on airfares is uncertain. Empirical evidence shows that the impact of two of three alliances (Star and SkyTeam) on prices on transatlantic hub-to-hub routes is insignificant after controlling for other factors. Routes between oneworld alliance hubs, however, have significantly lower business class airfares compared to other routes. These results indicate that the impact of alliances on transatlantic hub-to-hub airfares varies depending on the alliance; possibly due to the ability of an alliance to coordinate fares.     

Route choice of bike share users: Leveraging GPS data to derive choice sets

To identify the determinants of bike share users' route choices, this research collects 132,397 hub-to-hub global positioning system (GPS) trajectories over a 12-month period between April 1, 2015 and March 31, 2016 from 750 bicycles provided by Hamilton Bike Share (HBS). A GIS-based map-matching algorithm is used to derive users' routes along the cycling network within Hamilton, Ontario and generate multiple attributes for each route, such as route distance, route directness, average distance between intersections, and the number of turns, intersections, and unique road segments. Concerning route choice analysis, the origin and destination pair should be the same for all routes within a choice set, thus HBS users' trips are grouped by origin-destination hub pairs. Since trips taken by different users between a hub pair can follow the same route, unique routes are extracted using a link signature extraction tool. Following this, a normalized Gini (G_n) coefficient is calculated for each hub pair to evaluate users' preferences among all the unique hub-to-hub route choices. A G_n closer to 0 indicates that routes between a hub pair are more evenly used, while a value closer to 1 implies a higher preference toward one dominant route. Three route choice models, a global model, a medium G_n model, and a high G_n model, are estimated using Path-Size Logit to determine how route choice is affected by the presence of dominant routes. These models suggest that HBS users are willing to detour for some attributes, such as bicycle facilities, but tend to avoid circuitous routes, turns, steep slopes, and roads with high traffic volume.     

Segmenting industrial competitive markets: An example from air freight

This paper applies a disaggregated approach to segment industrial markets under competitive structures taking the air-freight market for the high-technology product industry in Taiwan as a case study. Data from firms is used to examine the structure of the air freight industry and we find that carriers are clustered into two strategic groups, express and forwarder. Pricing is a leading strategy recognized by customers for forwarders, whereas service punctuality and freight security are the winning strategies for express. The high-tech freight market is classifiable by shipment destination and size.     

An evaluation of airline beta values and their application in calculating the cost of equity capital

This paper focuses on the calculation of the cost of equity capital in a sample of airlines, in comparison to industry-calculated values. The approach usually taken is to apply the Capital Asset Pricing Model to airline stock prices and market indices. The research shows that the calculated β values are sensitive to the precise methodology and calculations used. Further, the low regression model fits indicate the Capital Asset Pricing Model may not be the most suitable model for β value calculations. The emerging β values are lower than expected, and possible causes of this are discussed.     

Achieving genuinely dynamic road user charging: issues with a GNSS-based approach

A variety of approaches to road user charging (RUC) for reducing congestion and raising revenue to maintain and improve transport infrastructure is in place in many countries; examples of such RUC include: an Electronic Fee Collection System in Singapore, Cordon Pricing in Oslo City in Norway, Zoned Based Pricing in London and Distance-Based Pricing (also called Pay-As-You-Drive) in Germany and Switzerland. With the development of satellite technologies, the introduction of dynamic pricing becomes possible, affording an opportunity for RUC to fully reflect the ‘Polluter Pays Principle’. This paper provides critical and comparative assessments of existing road user charging (RUC) systems with reference to technological limitations and public and political acceptability. The paper then goes on to demonstrate a system architecture for a Global Navigation Satellite System (GNSS) based dynamic road user charging system capable of considering dynamic variables. Finally we consider the feasibility of the proposed system in relation to technology readiness and public acceptability. We then consider some potential wider benefits from the introduction of a comprehensive system that could be highlighted to justify the cost of development and implementation as well as to improve public and political acceptability. The paper ends with conclusions and future research directions.     

Choosing a port: An analysis of containerized imports into the US

Using a unique data set of individual shipments, port characteristics, and actual freight charges, we examined potential factors within management controls that affect the attractiveness of a port for containerized shipments. We hypothesized that the importance placed on each factor varies by the size of the shipper. We find support for our hypotheses that large shippers emphasize the factors affecting speed of delivery more than the freight charges compared to small shippers. These findings have managerial implications because investments in port development would pay off depending on the fit between the type of investment and the customers’ needs.     

Airline cost changes: To what extent are they passed through to the passenger?

Since the start of the Millennium airline costs have been highly volatile, mainly due to large fluctuations in jet fuel prices. An important question for airlines and regulators is whether airlines are able to pass through cost changes to their prices. Little empirical evidence on the pass-through of costs exists. In this paper, we investigate which pass-through rates are most likely. According to economic theory, the pass-through of costs depends strongly on the type of cost increase (firm-specific or sector-wide) and market conditions (monopoly, oligopoly, perfect competition). In monopolistic markets, the shape of the demand curve also matters (linear, constant elasticity, log, power function). A pass-through rate of 100% is often assumed based on the reasoning that the aviation sector is highly competitive. We analyse market concentration in all airline markets in the world, and generally find a high level of concentration. Additionally, different airlines offer different products based on a variety of factors, including service, flight frequency, legroom, bags allowed on board, flight time and transfer time. Therefore, most aviation markets can be characterised as differentiated oligopolies. As airlines choose their quantities first (flight schedules) and adapt their prices to demand (yield management), we consider the Cournot model the best choice. In such markets, firmspecific cost changes will be passed through by a rate of less than half while sector-wide cost changes are passed through by a rate of more than half. In specific situations, the pass-through rate may be different. Examples are limited airport capacity (congestion), cross-subsidization, and the extent to which there is a level playing field.     

Misunderstandings about airline growth

Consolidation is a myth. Data suggest that the airline industry is not consolidating. Competition is either increasing or almost constant, depending on the type of measurement. Hubs are here to stay because half the O–D travel in the world is in markets too small to be served nonstop. Fortunately, small markets are willing to pay. Hubbed carriers’ economic strength is observable in the US ticket price data. Growth has not lead to bigger airplanes—trend in airplane size has been flat to declining since 1985. The evidence is the same in all regions of the world. Big airplanes spend more time on the gate and turn slower, increasing system costs. For small airplanes, value is created by frequency. The share of the largest size shows significant decline. Industry real yields have been declining at 2–3% a year, but cost savings do not need to match this pace. Longer trips and leisure markets have lower yields, so yield can change as the mix changes, even while fares are stable. Data show flat business fares and leisure fares declining by 1% per year. Cost savings continue to match the decline in fares. Jets, high-bypass engines, revenue management, travel agency fees, and competitive wages have each had their turn in reducing costs.     

Ramsey pricing including CO2 emission cost: An application to Spanish airports

The long-term growth in the air transport is leading to the need to expand airport infrastructure but this has serious environmental implications. Thus, there is the need to establish an alternative to the traditional airport pricing structure for landing fees, which reflects the overall costs that air transport operators impose on others. Airport pricing should provide a sound guide for future investments, and at the same time reflect whether additional facilities are needed and at what price, by taking into account all costs, including environmental costs. This paper analyses one application of Ramsey Pricing on uncongested Spanish airport, by considering the CO₂ emission costs as a valuable input.     

Default risk drivers in shipping bank loans

This paper proposes a credit scoring model for the empirical assessment of default risk drivers of shipping bank loans. A unique dataset, consisting of the credit portfolio of a ship-lending bank is used to estimate a logit model with two-way clustered adjusted standard errors, ensuring robust inferences. Industry specific variables, captured through current and expected conditions in the extremely volatile global shipping freight markets, the risk appetite of borrowers–the shipowners – expressed through the chartering policy they follow – and a pricing variable, are shown for the first time to be the important factors explaining default probabilities of bank loans.     

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。     

Factors influencing the hub connectivity of Beijing Capital Airport in its international markets

This paper investigates factors influencing the hub connectivity of Beijing Capital Airport (PEK) in its domestic to international markets between 2014 and 2018 based on a random-effect panel data model. The results show that variables representing the temporal and spatial characteristics of connecting flights have significant impacts on the hub connectivity of PEK. In specific, the changeable threshold of maximum connecting time based on different international destination regions has a negative impact. This paper identifies different timetable coordination modes at PEK and shows that the number of indirect connections under adjacent mode is significantly less than that of distant mode. Circuity and directionality are proven to have significant impacts. In addition, factors representing airport characteristics and heterogeneity of international destination regions also affecting the hub connectivity of PEK.     

重庆轻轨票价方案研究

从理论上分析了影响重庆轻轨票价的主要因素,提出用拉姆齐(Ramsey)定价模型和“高峰负荷定价法”确定介于边际成本和盈亏平衡之间的最优票价。同时运用计量经济学的方法对轻轨价格需求弹性系数和运营成本做了近似估计,并为重庆轻轨制定出分段计程制票价方案。     

Airport partial and full privatization in a multi-airport region: Focus on pricing and capacity

This paper studies the capacity and pricing choice of two congestible airports in a multi-airport metropolitan region, under transition from a pure public, centralized airport system to partial or full privatization. We develop analytical models to investigate three privatization scenarios: public–private duopoly, private–private duopoly, and private monopoly. We find that, airports follow the same capacity investment rule as prior to privatization when capacity and pricing decisions are made simultaneously. Pricing rule after privatization becomes more complicated, with additional factors having an upward effect on the privatized airport(s) and a downward effect on the remaining public airport.     

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.     

Maintaining competitiveness of aviation hub: Empirical evidence of visitors to China via Hong Kong by air transport

Prior studies have not extensively researched and explored the key determinants (aviation and tourism attributes) that could affect Hong Kong’s competitiveness as a transit hub for international visitors using Hong Kong as a stopover to Chinese cities when travelling by air. This study adds to that knowledge to empirically investigate Hong Kong’s eight major tourist source markets (Germany, India, Japan, Singapore, South Korea, Taiwan, the UK, and the US), and also provides an insight to policy-makers in Hong Kong to help them understand the factors that influence Hong Kong’s aviation hub competitiveness and tourism development. The findings of the study suggest that increased air transport capacity from foreign countries and Hong Kong to China, trade volumes between China and its trading partners, air transport costs, and the global financial crisis are the key factors affecting the number of visitors to China by air passing through Hong Kong as their preferred stopover. The policy implications of the findings are discussed.     

Testing the differentiated impact of the COVID-19 pandemic on air travel demand considering social inclusion

The economic downturn and the air travel crisis triggered by the recent coronavirus pandemic pose a substantial threat to the new consumer class of many emerging economies. In Brazil, considerable improvements in social inclusion have fostered the emergence of hundreds of thousands of first-time fliers over the past decades. We apply a two-step regression methodology in which the first step consists of identifying air transport markets characterized by greater social inclusion, using indicators of the local economies’ income distribution, credit availability, and access to the Internet. In the second step, we inspect the drivers of the plunge in air travel demand since the pandemic began, differentiating markets by their predicted social inclusion intensity. After controlling for potential endogeneity stemming from the spread of COVID-19 through air travel, our results suggest that short and low-density routes are among the most impacted airline markets and that business-oriented routes are more impacted than leisure ones. Finally, we estimate that a market with 1% higher social inclusion is associated with a 0.153%–0.166% more pronounced decline in demand during the pandemic. Therefore, markets that have benefited from greater social inclusion in the country may be the most vulnerable to the current crisis.