Connectivity to international markets: A multi-layered network approach

Improving connectivity for freight movements between countries is increasingly a topic at the centre of the international trade and transport policy agendas. In spite of this, a method to asses a country's degree of connectivity to its international markets for freight is still missing. To close this gap, this paper proposes a multi-layered network approach that enables the assessment of: (i) the different factors that influence connectivity to international markets; and (ii) the extent to which a country's connections matter for its international trade activities. The international trade network and its ‘support network’ are analysed using network theory. The approach proposed is applied to the Americas, a region the relevant literature has not specifically focused on yet. It is expected that a comprehensive understanding and assessment of the determinants of connectivity for freight will contribute to guide and design more effective policies to remove barriers to international trade flows.     

Spatial concentration and connectivity of international passenger traffic at Brazilian airports

This paper examines concentration and connectivity of international passenger airport traffic in Brazil. The analysis considers seat supply and scheduled flights from 1999 to 2012. The 2000–2005 period was marked by concentration and limited international flight links, which was followed by the movement to recover capacity and connectivity from 2005 to 2010. Brazil started to liberalize bilateral agreements in 2002, and eventually moved towards the “open skies” concept in 2010, facilitating the process of operational de-concentration and increasing seat supply. The Brazilian government's liberalisation policy through bilateral agreements did not spark off a significant turnaround for national airlines; rather, the revived traffic growth was led by foreign airlines. This movement brought significant changes in the composition of international passenger traffic in Brazil, although changing little in terms of concentration and connectivity. The real change was the dominance of foreign airlines and seat distribution by regions, with the Latin America and Caribbean region shrinking to less than half of the market.     

The impact of air policy on incoming tourist traffic: the contrasting cases of the Caribbean Community and the Middle-East

It is generally agreed that government ownership and participation in national carriers and regulated air service agreements can lead to inefficiencies and abuses of market power. This can result in poor carrier performance and service levels, impeding further growth in tourism markets. This paper contrasts this theory with recent case evidence from the Caribbean and the Middle-East. The former represents the mature exotic type beach holiday while the latter is a fast developing religious, cultural and multi-product form of tourism. In both cases multi-step relationships exist between the development of air transport policy and the number of incoming visitors. The strength and significance of these interrelationships are tested using two separate best-fit Structural Equation Models (SEMs) based on a panel data set of a selection of endogenous and exogenous variables for the period 2000-2007. It is found that, despite both regions’ continued government participation in national carriers, only in the Caribbean has this appeared to have resulted in the expected dampening effect on tourism output, whereas a reverse effect was found for the sample of Middle-Eastern states. Focussing on their formidable hub-and-spoke networks, state owned and vertically integrated Middle-Eastern carriers are still encouraged to offer competitive fare and service levels to capture 6th freedom traffic with the growing number of long-stay visitors being one of the main beneficiaries of this.     

Low-cost carrier entry at small European airports: Low-cost carrier effects on network connectivity and self-transfer potential

Airport connectivity can improve the competitiveness of regions by attracting tourism and inward investment. Regions traditionally accessed international destinations via connecting flights to national gateway airports usually operated by full service network carriers (FSNC). However, the entry of low-cost carriers (LCC) in these markets has led to changes in incumbent FSNC service provision. We analyse how intra-European connectivity has changed at small airports between 2002 and 2012 and how LCC entry has affected the quality of day-return schedules in these markets. Results show that offline LCC connectivity is greater than that scheduled by FSNCs. Furthermore, LCC entry had a negative effect on the quality of the connectivity offered by FSNCs. Interestingly, we also found that day-return itineraries become more difficult for passengers in markets where the LCC is the sole operator. Regional policy-makers may need to more carefully consider the connectivity implications in the design of LCC start-up incentive schemes.     

Mapping causalities of airline dynamics in long-haul air transport markets

The introduction of low-cost air transport services to short-haul routes has significantly shaped the structure of this market segment. Recent research investigates and discusses the transferability of the low-cost carrier business model to long-haul routes and identifies respective challenges such as lower cost advantages over the competing full-service network business model. Our paper complements the existing research with a review of airline dynamics in long-haul air transport markets and the subsequent development of a causal loop diagram of the transatlantic air transport market using systems thinking. The objective of this paper is to provide an overview of specific characteristics regarding airline operations in the transatlantic air transport market to investigate the market potential of long-haul low-cost carriers competing with full-service network carriers in this market. We implement these characteristics in a causal loop diagram which comprises the most important elements of and causalities within the long-haul air transport market that affect the development of these elements. These include the generation of transatlantic air transport demand, passenger choice, and airline ticket price and fleet development. The causal loop diagram serves as a framework for qualitative investigation of the market potential of long-haul low-cost services. The paper proves systems thinking to be a feasible approach to map causalities based on knowledge from scientific literature.     

How air transport connects the world – A new metric of air connectivity and its evolution between 1990 and 2012

To understand as to how scheduled air services link a region to other markets, we develop connectivity and hub centrality metrics. These metrics measure the quality of all scheduled air services in terms of frequency, detours, layover time and destination quality using a valuation scale being derived from observed passenger behavior. By computing yearly scores for 1990 to 2012, we analyze the geography of and trends in worldwide connectivity and hub centrality. While we observe significant growth of aggregate connectivity, the trends are heterogeneous with regard to the type of connectivity as well as time and location.     

Intermodal alliance and rivalry of transport chains: The air cargo market

This paper examines the effect of multimodal integration on the rivalry between two transport chains – a forwarder–airline alliance and an integrator – under the economies of traffic density. An improvement in multimodal integration by a forwarder–airline alliance would increase the alliance’s output, while reducing the integrator’s output, not only in the multimodal market but also in other markets of the cargo network. It would further increase the alliance’s profit, provided the intermodal improvement is not too costly, while reducing the integrator’s profit, and would likely improve both consumer surplus and total surplus. We also find that an alliance in general leads to greater market shares for the firms involved than outsourcing.     

Measuring foreland container port connectivity disaggregated by destination markets: An index for Short Sea Shipping services in Spanish ports

The present research aims to develop a Foreland Port Connectivity Index (FPCI) including both qualitative and quantitative variables related to the characteristics of the maritime services provided. To that end, the FPCI incorporates two discount factors—the number of shipping services and destination countries—as penalties to correct for the quality of a port connection. After defining the FPCI, the index is applied to Spanish ports to study their connectivity in terms of container Short Sea Shipping (SSS) services. Although the connectivity of SSS traffic has not been widely studied, it is an interesting case study as small ports play a more relevant role in facilitating access to international markets for importing and exporting companies. According to the results, the port of Valencia is the most connected, followed by the ports of Barcelona and Algeciras. Furthermore, this is the first research paper to attempt to study foreland port connectivity disaggregated by destination market. This geographical approach enables a more precise identification of the main port competitors by destination market, thereby providing more detailed information to support port managers and policy-makers in their decision-making.     

Long-haul specialization patterns in European multihub airline networks – An exploratory analysis

Multihub airline networks are an important phenomenon in today's air transport market. An important question is to what extent different factors play a role in the specialization between hubs that are part of the same multihub network. This paper shows that total European market size to a certain long-haul destination and the ratio between the origin-destination market at the primary and the secondary hub are important variables for the role hubs play in the long-haul network of European multihub systems. Large long-haul markets are generally served from both the primary and secondary hub. Multihub carriers serve smaller long-haul markets uniquely from a single hub, depending on the relative advantage in the local origin-destination market. Looking at actual specialization patterns within European multihub networks, we distinguish between complementary multihub systems (such as Amsterdam–Paris CDG), overflow systems (such as Frankfurt–Munich) and regional systems (such as Paris CDG–Lyon).     

Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines

Air Traffic demand in Latin America is expected to double over the next twenty years, yet airline profitability in the region remains highly problematic. The impediments challenging financial prosperity in the continent are numerous and have resulted in prolonged loss-making periods across most Latin American carriers. Breaking with this trend, Copa Airlines has been able to report double-digit net results for several years and recorded 56% of total profits earned by all Latin American carriers in 2016. This research has identified a number of Key Performance Indicators that have underpinned Copa Airlines' financial prosperity through a Product and Organisational Architecture (POA) framework analysis whose results were validated and elaborated upon by the CEO of Copa Airlines. Copa's sustained financial success was attributable to a number of factors. First, its geographical positioning has allowed it to engineer strong connectivity by coupling North and South America through its hub, which is reachable with narrowbodies to nearly all points in the Americas. Second, its low unit cost structure is akin to that of LCCs, operating a single aircraft type with high utilisation. Third, it has a uniquely low market concentration of competitors on its routes and capitalises on this by having a strong schedule with high frequencies together with outstanding punctuality. Fourth, it has a synergistic and fruitful cooperation with its hub airport at Tocumen. Finally it benefits from positive external factors such as a dollarized home economy with high GDP growth, exceptionally low unemployment and inflation rates ring-fenced with security. These pillars can be used as a reference for other Latin based airlines seeking to improve profitability.     

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.     

European intermodal freight transport network: Market structure analysis

The analysis of market structure and concentration measures for the Intermodal Freight Transport (IFT) market is important to avoid market failure and to find the areas for policy making to promote IFT market share. This analysis can be performed for separate segments, for example, the market for transshipment service or the market for main-haulage service. However, due to the multistage characteristic of IFT service, the segmental analysis gives an incomplete view of the IFT market at the network level. In a previous paper (Saeedi et al., 2017), we present the Intermodal Freight Transport Market Structure (IFTMS) model to conduct a network-based study of the IFTMS in which distinctive actors (i.e., pre/post haulage operators, terminals, rail/barge operators, transport chains, and corridors) are competing at different levels inside distinctive markets to deliver an integrated IFT service. There are two main challenges in the application of IFTMS model in real cases, for example, the European IFT network. First, the definition of the geographical and spatial border of the transshipment market areas is needed to determine which actors are potentially competing for a specific service demand. The second challenge is the lack of disaggregated data and the consistency of existing data in nodes (i.e., the transshipment areas) and links (i.e., the rail and barge operators). To cope with these challenges, we develop a four-step methodology in which a model-based approach is used to define the geographic boundaries of the transshipment submarkets and provide detailed and consistent data for market analysis. We also apply the IFTMS model to study the market structure of European intermodal network. Our analysis shows that the majority of transshipment markets as well as main-haulage markets are highly concentrated markets. The corridor markets – which include the IFT chains – are unconcentrated markets. Furthermore, the majority of corridors in the European Union are inside highly concentrated origin-destination markets.     

Financial investment behavior tendencies of air carriers

This study looks at the financial investment behavior of air carriers in Taiwan and the US stock markets. Application of the DHS model via behavioral finance theory indicates a tendency of becoming overly confident in Taiwan's domestic market. It is also known that Taiwanese investors react with excess optimism regardless of market conditions. Availability of private information before and after public announcements has little effect on investment behavior. Contrarily, US investors indicate a lower degree of overconfidence.     

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.     

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.     

Connectivity measures and passengers’ behavior: Comparing conventional connectivity models to predict itinerary market shares

Connectivity measures have been widely used by researchers and practitioners in the air transport industry to evaluate the degree of transport provision at different levels of detail. This paper adds to the literature by presenting a comprehensive study of the predictive performance of connectivity indices in estimating aggregate itinerary market shares. Our empirical analysis encompasses both nonstop and connecting itineraries that originated or destined in Europe during 2018. The predictive accuracies of the respective measures are assessed against actual market shares and an ad-hoc benchmark derived from a logit-based calibrated index and evaluated in terms of their prediction-error distributions. Our results suggest that the use of connectivity indices can significantly improve the assessment of itinerary market shares relative to conventional size-based measures (up to 16.9% gain in accuracy over itinerary frequency). These improvements, along with their use of standard formulations and lack of a calibration requirement, make connectivity models a valuable tool for practitioners to use in allocating aggregate air travel flows. An examination of different scenarios—short-/medium (SH/MH)-vs. long-haul (LH) and sizeable vs. thin markets—reveals that determination of the best index is not a straightforward task and provides guidance to selecting the best connectivity measure.     

A spatial analysis of air transport access and the essential air service program in the United States

In the United States, the goal of essential air service (EAS) is to provide a minimum level of air transport service from smaller, often remote communities to the national network. While supporters of EAS tout the economic benefits of connecting rural and isolated communities, critics cite high costs, low use and antiquated eligibility requirements as factors which compromise the value of the program. In this paper, a comprehensive database of US airports is combined with network analysis techniques and a geographic information system to evaluate population access (at the census tract level) to EAS airports for 2006. Results suggest that redundant coverage of EAS market areas by alternative Federal Aviation Administration designated hub airports can contribute to EAS airport market leakage and that alternative definitions of EAS community eligibility have the potential to dramatically increase programmatic efficiency and reduce federal monies spent on EAS subsidies.     

Demand for leisure air travel and limits to growth

This paper discusses methodologies for analysing the existence of limits to growth of leisure air travel and defines the concept of demand maturity. It considers the air market as one of a number of inter-related travel markets and applies these concepts to a UK case study. The paper concludes that the UK air international leisure travel market is only at the early stages of maturity; whilst the overall leisure travel market seems to be much nearer to full maturity. This means that if UK air travel is still to experience healthy growth rates, it must be at the expense of the growth of some other UK travel market.     

Robustness of the air transport network

This paper presents a methodology for the detection of critical airports (those whose isolation would cause the largest losses in network connectivity) in the global air transport network (ATN), based on simulating an attack on selected ATN airports using different adaptive selection criteria. The performances of several node selection criteria are compared, together with a new criterion based on Bonacich power centrality. The results show that most critical airports can be detected with an adaptive strategy based on betweenness centrality. The detection of such airports may help the development of contingency plans to develop an appropriate response to any airport closure.     

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.