The growing influence of low-cost carriers in Northeast Asia and its implications for a regional single aviation market

This paper provides an overview of the development of the low-cost carrier (LCC) sector in China, Japan, and South Korea. It is the first paper that documents LCC contributions to the passenger traffic and cheaper fares in Northeast Asia (NEA)'s intra-markets. We argue that a single aviation market can facilitate the growth of the LCC sector, which in turn will make a significant contribution to the NEA connectivity, mobility, and integration. In addition, with a single aviation market, NEA countries can adopt a proactive, unified approach in negotiating air transport agreements with the major aviation partners to maximize the interests of this region as a whole, which will further provide valuable growth opportunities for the LCCs.     

The impact of low-cost carriers on airport choice in the US: A case study of the Washington–Baltimore region

Previous research has shown that low-cost carriers (LCCs) may stimulate traffic at an airport by offering low fares. Using passenger survey data from the Washington–Baltimore region’s three airports, we find that the benefits of LCCs to airports extend beyond the traffic generated directly by the LCCs through their low fares. In addition, we find that the mere presence of an LCC at an airport can attract passengers, even to competing carriers. These “halo effects” from LCC presence increase the significance to airport managers of attracting LCCs in order to generate passenger demand.     

Whether low-cost-carrier passengers spend more on duty-free goods at the airport? Evidence from Incheon International Airport

With a dramatic growth in the low-cost carrier (LCC) traffic around the world, many airports have built budget terminals to accommodate the LCC flights with cheaper airport charge to the airlines but inferior shopping environment and service quality to the passengers. This study aims to answer the following research questions: i). Whether the LCC passengers have higher purchasing power than FSC (full-service carrier) passengers for the airport concessions, particularly the duty-free goods? ii). Would the budget terminal design contribute to or jeopardize the LCC passengers' airport concession expenditure? iii). How could the airport operator maximize its concession revenue by re-designing terminal or re-allocating flight slots? We collect the actual airport duty-free transaction data from Incheon International Airport (ICN) for an empirical investigation. Our empirical evidence first suggests that LCC passengers could have comparable or even higher purchasing power than FSC passengers in consuming duty-free goods at the airport. Among all the LCC passengers, Chinese have the highest purchasing power. Second, the inferior shopping environment and service quality of budget terminal seriously jeopardize the duty-free sales from the LCC passengers. Third, counterfactual analyses show that, if ICN could convert its budget terminal into a conventional terminal, 44 million USD more duty-free sales can be generated per year. Even keeping the current terminal design, re-allocating the LCC flights between the budget terminal and conventional terminal could bring approximately 4.9 million USD more duty-free sales per year. The findings provide managerial implications to ICN and other airports for effective airport revenue management. First, the budget terminal design may not be ideal to accommodate LCC traffic as it damages the concession revenue from particular LCC passengers with high purchasing power. Second, exploring the concession revenue from the growing LCC traffic could help maintain an airport's advantage in aeronautical charge under single-till regulation.     

Exploring characteristics of passengers using traditional and low-cost airlines: A case study of Belgrade Airport

Low cost carriers entered the Serbian air travel market after Serbia joined the European Common Aviation Area (ECAA) in 2006, prompting the development of healthy competition among airlines and resulting in significant traffic increase at Belgrade Airport. The aim of this paper is to examine the characteristics of passengers traveling on low-cost carriers (LCC) in comparison with those traveling on traditional airlines by using cluster analysis, and to provide practical implications to airport management in tailoring their strategies to meet growing demand. A comprehensive passenger survey was recently conducted at Belgrade Airport on the routes where competition between traditional and LCC carrier exists. The results reveal that emigrants, primarily encouraged by favorable fares, constitute a substantial portion of LCC passengers. Affordable service offered by LCC has also been a positive stimulus for emigrants, who purchase tickets for their friends and relatives to visit them in their host countries. On the other hand, passengers using traditional airlines could be generally classified into two segments, those who fly on business and those who fly for leisure purposes, and each had specific needs when choosing their airline.     

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.     

Adoption and loyalty toward low cost carriers: The case of Taipei–Singapore passengers

This study explores the determinants for the duration of airline passengers to adopt a low cost carrier (LCC) and their loyalty toward the LCC. The analysis results of travel information on 338 passengers traveling between Taipei and Singapore show that business passengers take longer duration to accept the LCC. Cheaper fares and convenient booking channels can shorten the passenger’s duration to adopt the LCC, whereas airline image and safety consideration can increase the duration. Frequent flyer programs and convenient booking channels can increase the passengers’ loyalty toward the LCC.     

Evaluation of passengers' buying behaviors toward low cost carriers in Southeast Asia

The purpose of this paper is to examine how Southeast Asian passengers' attitudes and behaviors affect their buying intention and actual purchase of Low Cost Carrier (LCC) tickets. A research model was developed based on the Theory of Planned Behavior. A survey of 791 passengers was conducted in two major airports in Thailand to test the hypotheses. Results indicated the important role of passengers' attitudes, subjective norms, and perceived behavioral control in LCC passengers' buying behaviors. The paper provides LCCs with useful information about passengers’ attitudes and behaviors toward using LCC services, which will help the carriers form necessary strategies to attract more customers.     

Predicting car drivers’ intention to use low cost airlines for intercity travel in Libya

This study used an extended version of the theory of planned behaviour (TPB) to predict the travel intention of car drivers in Libya with regard to using the new low-cost carriers (LCC). In order to understand the willingness of travellers to accept the LCC in Libya and its antecedents, this study has added three constructs to the original TPB model, namely novelty seeking, trust, and external influences. The respondents in this study are 338 car drivers in Libya. The results of this study indicate that attitude towards LCC, perceived behavioural control, and subjective norm all have positive effects on the behavioural intention of taking LCC. Furthermore, novelty seeking and trust have indirect positive effects on behavioural intention. Trust, on the other hand, has an indirect positive influence on the three antecedents of intention in accepting LCC in Libya. Results also revealed that external influence (i.e. advertising campaigns by the media) has a significant indirect influence on car users’ intention to accept the new LCC via subjective norm and perceived behavioural control, and indirect influence on the behaviour intention of car users via novelty seeking with regard to attitude towards LCC and trust to perceived behavioural control.     

Air traffic forecast and its impact on runway capacity. A System Dynamics approach

The uninterrupted growth of air traffic in Colombia has been reinforced since the 1990s by a public policy of liberalization of airspace, and by redirecting public and private investment towards the modernization and updating of airport infrastructures, giving in concession the busiest airports in the country, 19 to date. In the commercial air sector, and in this same period, the flag airline was privatized and new air operators, including low cost airlines (LCC), entered the market. Since 2012, air fares are completely deregulated. Consequently, in the last two and a half decades, passenger transport in Colombia grew by 863%. This important growth rate has been driven and led by the country's main airport, the Bogotá-El Dorado International Airport (BOG), in the capital of Colombia. But some technical reports consider the airport will reach its maximum capacity in the short term mainly because of its inability to expand its airfield (runway system). Due to this circumstance, the aeronautical public authority of Colombia gave course to the planning, design and construction of a new airport (complementary) on the outskirts of the city of Bogotá, which will enter the design phase in 2026/2027. Therefore, it is considered suitable the development of a traffic forecast for BOG in the medium term and to evaluate the impact of future demand on the runway capacity of the airport. Then, and due to the complexity of the air transport forecast, the use of System Dynamics (SD), is considered to be appropriate as an analysis approach. System Dynamics is based on feedback control theory and it is equipped with mathematical computer simulation models, which uses linear and non-linear differential equations. The results suggests a need to expand the airport case study (runway system) after mid-2019, where the current capacity utilization factor is around 100% and two to three runways will be required for the normal operation; after October 2022 the number runways required is set to three until the last period simulated (2023).     

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.     

Network development of low-cost carriers in China's domestic market

This paper examines China's LCC market and assesses the network development patterns from a geographical perspective. Overall, a nationwide LCC network has been formed with each individual LCC focusing on their own markets with limited overlap to avoid cut-throat competition. Spring Airlines has developed an advanced network supported by its core bases including Shanghai in East China, Shijiazhuang in North China, Shenyang in Northeast China and Shenzhen in South China. China United has developed a network radiating from Beijing. West Air and Lucky Air seem to be developing a hub-and-spoke network that contributes to the tourism industry in West China. The LCC network is affected by seasonal variations, especially for the routes to tourism destinations such as Haikou, Sanya and Xiamen. Hub cities, however, experience less seasonal impact. This research also finds that routes between 600 and 1800 km account for a large proportion of the LCC markets. Aviation policy, local government's subsidization and the expansion of the high-speed rail network have helped shape the landscape of China's LCC sector.     

Multiobjective optimization of asphalt pavement design and maintenance decisions based on sustainability principles and mechanistic-empirical pavement analysis

Highway pavement as an important component of transport infrastructure has significant impacts on economy, society, and environment. The management of highway pavement has been traditionally focused on economy. In this study, the impacts of management decisions are examined in three dimensions, including life-cycle cost (LCC), energy consumption, and greenhouse gas (GHG) emissions. Quantitative models to predict the three dimensions are developed from mechanistic-empirical pavement analysis results. Two decision variables, pavement thickness and threshold roughness level for pavement resurfacing, are found to be significant in affecting the three dimensions. These two variables are subsequently used as decision variables in multiobjective optimization. The ranges of decisions that result in minimum LCC, energy consumption, and GHG emissions are identified through multiobjective optimization. Although the analysis is illustrated in the context of pavement design and management in Hong Kong, the analysis techniques and procedures can be easily applied in other regions.     

Reinterpreting the role of primary and secondary airports in low-cost carrier expansion in Europe

This paper discusses the long-term effects of low-cost carrier (LCC) presence at European airports and identifies the airports that have benefited the most from LCC consolidation since 2001. The research uses ‘LCC Market Share’, in terms of seats, to measure the relative importance of LCCs within each airport; and introduces ‘EU LCA Rank’ as a normalised metric of the capacity share of every airport in the European low-cost segment. It evaluates the trends between 2001 and 2019 in all airports in Europe using OAG supply information (seats by carrier). Results show two different phases of LCC rise in Europe, 2001 to 2008 and 2009 to 2019, marked by the effects of the financial crisis of the Great Recession. The analysis highlights the role that LCCs have played in boosting the growth of both primary and secondary airports. Indeed, despite the fact that LCCs have put many smaller airports on the European map, during the second phase of the period of analysis growth has been more significant for major airports and for a few airports that were keen to support the earliest development of LCCs. In that sense, this paper contributes to a better understanding of the historical and contemporary dynamics in European LCCs choice of airports and, in particular, the long-term effects that this disruptive business model have had for airports. This is increasingly important in the context of a potential recovery path from the effects of the response to the Covid-19 pandemic. This paper also attempts to settle academic discussions that attach LCC development to secondary/regional airports disregarding the wide range of strategies used by airlines and airports.     

Can low cost carriers deter or accommodate entry?

This paper analyses entry deterrence and accommodation by low cost carriers (LCCs) with two games. In the first game two LCCs compete in a horizontal differentiation setting. Results show that the entrant may drive away the incumbent from its original location under certain conditions. In the second game the incumbent is a LCC and the entrant a full service carrier, with vertical differentiation. The incumbent tries to deter or accommodate entry by product proliferation. We find out that the incumbent will only deter entry if it can surpass the entrant’s quality, and that product proliferation is not an accommodating strategy.     

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.     

Grounded: Characterising the market exit of European low cost airlines

The aim of this paper is to undertake a comprehensive study of low cost carrier (LCC) market entry and exit in Europe between 1992 and 2012. In the 20 year period between 1992 and 2012, 43 LCCs have taken advantage of the progressive liberalisation of the European aviation market and commenced scheduled flight operations within the continent. Of these 43, only 10 remain operational, a failure rate of 77%. This paper contributes to extant literature on LCCs by examining the market entry, business practices, operating longevity and fate of failed operators to characterise European LCC market exit. Drawing on the findings of a detailed continental-wide study, the paper identifies that an airline's start-up date, the nature and size of its operation and the size and composition of its aircraft fleet are key factors which influence LCC success and failure. The implications for both European and emerging LCC markets are discussed.     

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.     

Low cost carriers in the Middle East and North Africa (MENA) region: Emergence and barriers to development

This paper investigates the development of low cost carriers (LCCs) in the Middle East and North Africa (MENA) region from a broader perspective. We use passenger volume data at the airline and flight segment levels to illustrate the development of LCCs in the region; we conduct a structured comparison of the actual business model characteristics of the MENA-based LCCs to assess their adherence to the archetypical LCC business model; and we compile the key barriers to LCC growth in MENA from the literature.We find that the overall market share of LCCs in MENA is still below the world average – despite high growth in recent years. The presence of LCCs varies considerably between MENA countries and route groups. The more upscale, “Jetblue”-style business model, where passengers benefit from additional, complementary services or product characteristics, prevails. Political tensions, adverse regulations and lower levels of liberalization compared to Europe or North America negatively affect LCC development in many MENA countries. While low middle-class proportions appear to be a challenge for low cost business models, Asian diaspora and tourism – from beach holidays to pilgrimage – seem to induce additional demand.     

A data-driven operational model for traffic at the Dallas Fort Worth International Airport

Airports are on the front line of significant innovations, allowing the movement of more people and goods faster, cheaper, and with greater convenience. As air travel continues to grow, airports will face challenges in responding to increasing passenger vehicle traffic, which leads to lower operational efficiency, poor air quality, and security concerns. This paper evaluates methods for traffic demand forecasting combined with traffic microsimulation, which will allow airport operations staff to accurately predict traffic and congestion. Using two years of detailed data describing individual vehicle arrivals and departures, aircraft movements, and weather at Dallas-Fort Worth (DFW) International Airport, we evaluate multiple prediction methods including the Auto Regressive Integrated Moving Average (ARIMA) family of models, traditional machine learning models, and DeepAR, a modern recurrent neural network (RNN). We find that these algorithms are able to capture the diurnal trends in the surface traffic, and all do very well when predicting the next 30 minutes of demand. Longer forecast horizons are moderately effective, demonstrating the challenge of this problem and highlighting promising techniques as well as potential areas for improvement.Traffic demand is not the only factor that contributes to terminal congestion, because temporary changes to the road network, such as a lane closure, can make benign traffic demand highly congested. Combining a demand forecast with a traffic microsimulation framework provides a complete picture of traffic and its consequences. The result is an operational intelligence platform for exploring policy changes, as well as infrastructure expansion and disruption scenarios. To demonstrate the value of this approach, we present results from a case study at DFW Airport assessing the impact of a policy change for vehicle routing in high demand scenarios. This framework can assist airports like DFW as they tackle daily operational challenges, as well as explore the integration of emerging technology and expansion of their services into long term plans.     

Which is a stronger competitor,High Speed Rail,or Low Cost Carrier,to Full Service Carrier? – Effects of HSR network extension and LCC entry on FSC's airfare in Japan

In Japan, High Speed Rail (HSR) extended its network in 2011 and 2015, and Low Cost Carriers (LCC) entered into the domestic airline market in 2012. We compared the effects of the extension of the HSR network and the entry of LCCs on the airfares of the incumbent Full Service Carriers (FSC). We conducted Difference in Differences analysis with passenger level data to evaluate these market changes, and found that the effects of the HSR extension on FSC's airfares were consistently negative and larger in the short haul markets, while the effects of the entry of LCCs were inconsistent. HSR seems to be a stronger competitor than LCC to FSC and this finding could be affected by capacity, which is large for HSR while small for the LCCs.