An empirical analysis of airport capacity expansion

Theoretical analyses of the impact of airport capacity expansion must model or make assumptions about the effect of capacity on demand, airline competition, aircraft types, fares and other characteristics of a given airport. In this paper, we use empirical data on historical schedules, fares, delays and demand for the busiest 150 airports in 2015 to examine the typical impact of historical capacity expansions. We find significant diversity in outcomes, with over half the expanded airports either using less than their pre-expansion capacity or remaining constrained even at post-expansion capacity by 2016. Many of the expected impacts, such as reductions in typical aircraft size, either do not materialise or are dominated by other effects (for example, recessions; airlines beginning or ending operations at an airport; changes in regulation). Behaviour on expansion is affected by slot control regulations and whether the airport is initially capacity-constrained. In particular, slot-controlled airports typically add new destinations and carriers on expansion rather than making significant changes to existing schedules.     

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.     

US airport financial reform and its implications for airport efficiency: An exploratory investigation

This study investigates the effect on airport productive efficiency of two major funding sources used by US airports, namely the Airport Improvement Program (AIP) grants and the Passenger Facility Charges (PFC). A two-stage Data Envelopment Analysis (DEA) modeling approach is employed for this purpose. In the first stage, we estimate airport productive efficiency using a variable returns-to-scale DEA model with both desirable and undesirable outputs. In the second stage, random effects regression models are estimated with airport efficiency scores from the first stage as the dependent variable and PFC and a proxy for AIP grants as two of the explanatory variables. By applying the two-stage DEA model to 42 primary US airports, it is found that PFC use has a positive impact on airport productive efficiency, whereas the impact of AIP grants is negative. Multiple counterfactual scenarios are examined by altering the mix of the two types of funding sources. The results show that simultaneously raising the PFC ceiling and decreasing AIP grants could lead to greater airport productive efficiency. The US federal aviation authority would also benefit from realizing these scenarios, especially given the budgetary constraints it faces.     

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.     

Regional airport choice: Consumer behaviour and policy implications

The analysis of origin airports in multi-airport regions has a well established tradition in transportation and regional economics. The main goal of the paper is to estimate the importance of the different attributes that determine origin airport choice. In our case we adopt a stated preference approach to study this problem and evaluate the effects of possible policy interventions. We also perform a detailed segmentation of the sample studied according to the socio-economic variables that prove statistically relevant when interacted with the attributes used to characterise airport choice. Moreover, in order to test for the presence of heterogeneity in agents’ preferences we estimate several mixed logit models with different specifications, including heteroscedasticity and error component. With respect to previous studies we develop and extend the traditional SP approach by also analysing the role and relevance of attribute cut-offs in this research field. The policy simulations produced are based on the estimation of airport-specific attributes. The study concentrates on a multi-airport region in central Italy where four competing airports are located.     

An empirical investigation of European airline business models: Classification and hybridisation

Airline business models are evolving and what was once a clear distinction between low-cost carriers (LCCs) and full-service carriers (FSCs) is now less apparent. LCCs and FSCs are merging into new hybrid carrier business models, a convergence accomplished in different ways by various airlines. This paper aims to establish how many types of business models exist and to examine the defining characteristics of the various levels of hybridisation. This is an empirical study based on a sample of 49 European airlines. Data are collected in a categorical format, where appropriate, or transformed into categorical variables if numerical. The methodology employed for analysis is the well-established k-modes technique. The clustering process indicates that there are four observable airline categories: FSCs, LCCs, and two hybrid types in between.     

Service quality and customer satisfaction of a UAE-based airline: An empirical investigation

This paper investigates the linkages among service quality, service provider image, customer expectations, perceived value, customer satisfaction and brand loyalty in a Dubai-based airline. Initially, the determinants of service quality were identified utilizing the SERVQUAL framework with some modification. Service quality was then used as an antecedent to measure customer satisfaction, a condition which can bring about brand loyalty. In a research initiative using a quantitative approach, data from 253 questionnaires was analyzed. Using structure equation modeling, the data analysis suggests that service quality, perceived value, and brand image have a positive significant impact on customer satisfaction, which can in turn lead to brand loyalty. Theoretical and managerial implications are discussed.     

An empirical investigation of psychological capital among flight attendants

Our paper develops and tests a research model that examines whether psychological capital (PsyCap) mediates the relationship between servant leadership and work engagement (WE) and whether WE mediates the effect of PsyCap on service recovery performance and life satisfaction. Data were collected from flight attendants with a two-week time lag in three waves and their pursers in the private airline companies in Iran. The results suggest that servant leadership influences WE indirectly only through PsyCap. The results also suggest that WE is a partial mediator between PsyCap and the aforesaid attitudinal and behavioral outcomes. Our study discusses theoretical implications and provides recommendations for managers in the airline industry.     

Market orientation and business performance: An empirical investigation in the airline industry

As the airline industry has become more competitive, carriers have looked to improve performance and competitiveness. During the last decade, market-oriented corporate strategy has emerged as a significant antecedent of organizational performance and is presumed to contribute to long-term success. This study investigates potential influences of market orientation on airline performance. Data were collected by mail survey, and MARKOR was used to specify the dimensions of a market-orientated organization. The results support the positive influence of market orientation on business performance.     

Hong Kong's aviation and tourism growth - An empirical investigation

This study investigates the critical link between aviation and tourism growth in Hong Kong, with a focus on the identification of causal relationships between scheduled airline seat capacity and visitor arrivals. This is achieved through the cointegration analysis and Granger-causality test, using monthly data collected from Hong Kong's top 17 tourist source markets during 2008–2018. Our analysis finds clear evidence of an overall two-way causal relationship between airline scheduled capacity and tourist arrivals. The positive externalities between the two crucial sectors to the Hong Kong economy call for coordinated planning and policy design in the tourism and aviation sectors, and justify continued government support. On the other hand, market-specific features are evident in selected markets. Such heterogeneity is likely due to airline network effect and regulation in the international market. Therefore, direct subsidy is not always an efficient support measure. A combination of liberalization policy and industry supports are preferred in views of the benefits to be achieved for the two sectors and the Hong Kong economy.     

Developing measures of airport productivity and performance: an application of data envelopment analysis

Many studies have investigated the financial results and economic productivity of airlines but few have investigated the productivity or performance of airports, and how changes in the industry may have affected them. Most airports measure performance strictly in accounting terms by looking at only total costs and revenues and the resulting surpluses or deficits. Few utilize any type of productivity measure or performance indicator. This paper applies Data Envelopment Analysis to assess the performance of airports. It is used to construct performance indices on the basis of the multiple outputs which airports produce and the multiple inputs which they utilize. In particular we develop productivity measures for terminals and airside operations. The performance measures are then used in a second stage Tobit regression in which environmental, structural and managerial variables are included. The regression results provide a ‘net’ performance index and also identify which variables the managers have some control over and what the relative importance of each variable is in affecting performance. The data set contains a panel of 21 U.S. airports over a five-year period.     

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.     

The relationship between airport performance and privatisation policy: A nonparametric metafrontier approach

The assessment of economic and technical efficiency is a useful tool for selecting the most appropriate technology for airport operations. However, traditional models require that the units being assessed operate with the same technology. To overcome this limitation, one can use a non-concave metafrontier approach that is based on Data Envelopment Analysis (DEA) to calculate the techno-economic efficiency and Technological Gap Ratios (TGRs) with non-homogeneous technologies for airports across countries and with different ownerships. The previous studies mainly applied DEA to measure the operational efficiency of airports. Our results indicate that privately owned airports have better technical efficiency than public ones. In addition, our empirical analysis shows that public airports in the Asia-Pacific area have the lowest techno-economic efficiency.     

Total factor productivity analysis of the UK airport industry: A Hicks-Moorsteen index method

This study examines the total factor productivity (TFP) change of the UK airport industry from 2001 to 2009 using a Hicks-Moorsteen index method. The results show that the industry experienced an average annual growth in TFP of 0.32 per cent with efficiency change being the main contributor to the TFP growth. We find that private UK airports enjoy slightly higher TFP growth than those in public or mixed ownership. Regulation and airport size are found to have statistically significant effects on the airport productivity level.     

Environmental purchasing and firm performance: an empirical investigation

Much debate has occurred in the extant literature as to whether socially responsible actions undertaken by firms result in improved financial performance. One key dimension of social responsibility is environmental initiatives and programs. While the purchasing function can create value and significantly affect the environmental actions of a firm and its upstream supply chain, no research to date has explored the effect of environmental purchasing on firm performance. Our research provides an initial examination of this relationship. We combine survey and archival data to show that environmental purchasing is significantly related to both net income and cost of goods sold, after controlling for firm size, leverage, and primary earnings per share.     

Triggering competition in the Spanish airline market: The role of airport capacity and low-cost carriers

We analyze the influence of increases in airport capacity and the entry of low-cost carriers on airline competition. We use parametric and non-parametric techniques to analyze a sample of Spanish routes. We find that capacity increases in large airports produce more competitive airline conduct only in routes departing from non-hub airports. Also, we find that the natural monopoly threshold decreases with time. Finally, low-cost carriers have a moderate but still significant effect on prices and increase alternatives even in low-density routes.     

Incorporating annoyance in airport environmental policy: noise, societal response and community participation

Airport capacity continues to be one of the air transport issues that creates the most concern. The major environmental constraint for airports is the noise generated by aircraft. Annoyed communities living around airports have become a limiting factor for airport capacity and operability. This paper brings together the existing literature in the fields of airport environmental capacity, non-acoustic factors of noise annoyance, NIMBYism and environmental conflicts. We also analyze the socio-environmental conflict between Barcelona airport and the community of Gavà Mar. This case shows that the lack of trust between parties, the impossibility of predicting noise exposure, the absence of opportunities for civil society to speak and the difficulty of accessing relevant information foster annoyance and mobilization in the communities that live around the airport. In addition, it is shown that, in such a situation, communities’ reactions can evolve to a post-NIMBY stage in which proactive attitudes replace reactive ones.     

Measuring the productivity changes of Chinese airlines: The impact of the entries of non-state-owned carriers

The competitive environment of the Chinese airline industry has experienced rapid change since non-state-owned airlines entered the market in 2004. We focus on measuring the productivity changes in the Chinese airlines, especially state-owned ones after this change. The results show that non-state-owned airlines are performing better than state-owned airlines. The productivity changes of state-owned airlines are mainly driven by technical changes before or after the entries of non-state-owned airlines. They have little efficiency improvement. However, the productivity changes of private airlines are mainly due to efficiency improvement. The changes associated with international joint venture cargo carrier are due to its significant improvement in both the efficiency and technical changes.     

Hub airport slot Re-allocation and subsidy policy to speed up air traffic recovery amid COVID-19 pandemic --- case on the Chinese airline market

With international air travels largely banned around the world amid the global COVID-19 pandemic, many gateway and hub airports have more ideal slots available for reallocation. Airport traffic recovery replaces airport congestion to become the primary challenge of major airports around the world. With the pandemic well controlled domestically in China, the government liberalizes the hub airport slots for those previously forbidden services to the small/regional airports. This paper thus analytically examines the effect of this slot liberalization. The government subsidy to the small airports has also been considered. It is found that the slot liberalization can speed up airport traffic recovery for both hub and small airports. The hub airport slot liberalization leads to a lower level of minimum subsidy to sustain the survival of the small airports. Given any fixed level of subsidy to the small airport, both the total airport traffic and social welfare would improve with the slot liberalization at the hub airport. When the government can adjust the level of subsidy after liberalizing the hub airport slots, the subsidy could be excessive, if the government emphasizes too much on airport traffic recovery. This would, however, harm the overall social welfare.     

Changes in land use typology of global airports: An empirical investigation with implications for the aerotropolis concept

Aerotropolis is an urban development concept characterised by the concentration of land uses fostering economic activities around airports. However, limited empirical evidence exists about the formation of aerotropolises and their effects on the productivity of airports. This study addresses the gaps by examining changes in land use patterns around 75 major airports globally, using data extracted from Google Earth for two time periods: 2004 and 2014. A Two-Step cluster analysis technique was applied to identify natural groupings of the airports in terms of their land use patterns for both periods. Changes in cluster membership were observed between the periods to examine the process of aerotropolis formation. A multivariate multiple linear regression (MMLR) model is estimated to identify factors contributing to aerotropolis formation process. Finally, the effects of the aerotropolis formation process on airport productivity is estimated in a two-stage least square (2SLS) regression model. Cluster analysis results show that airport land side development can be classified into three groups: Island airports (surrounded by largely vacant land), Waterfront airports (adjacent to a large body of water), and Built form airports (well-developed residential, commercial and industrial land uses). Overall, built-up areas increased by 2.1% between 2004 and 2014, and only three airports transitioned from Island to Built form – suggesting a weak evidence of the aerotropolis formation process. Developable land surrounding the airports and city population growth rate contributed significantly to this process, which consequently contributed to the productivity of airports. In conclusion, aerotropolises are a promising concept, yet unreal. It needs to be integrated with city plans to direct development, and thereby, to make it a reality.