A case study: The impact of low-cost carriers on inbound tourism of Saudi Arabia

This study investigates the impact of low-cost carriers (LCCs) on Saudi Arabia's tourism demand. It also provides an understanding of the relationship between air transport development and tourism development in the Gulf region. The Box–Jenkins SARIMA-X models were employed to model and forecast international tourist arrivals to Saudi Arabia, using monthly international tourist arrivals to Saudi Arabia from July 2010 to December 2015. The forecasting models were significantly accurate, with lower values of MAPE, MAP, and RMSE. The findings suggest that an increase in airline capacity, religious travel, and airline competition are associated with the increasing international tourist arrivals to Saudi Arabia. This also indicates that there is a positive relationship between air transport development and tourism development. Further aviation liberalisation in the Gulf region is discussed to give opportunities for the region's LCCs to increase their share of the increasing air travel demand, thereby enhancing tourism development.     

Modelling the volatility of international visitor arrivals to New Zealand

International visitor arrivals are considered to be a major source of foreign exchange, tourism-related employment and other tourism-related activities. This study used SARIMAX/(E)GARCH volatility models to forecast visitor arrivals by air transport to New Zealand from its eight key tourist source markets (Australia, Canada, China, Japan, South Korea, Germany, the United Kingdom (UK) and the United States (US)) and control macroeconomic factors together with global and regional structural changes. The empirical models reveal that the macroeconomic factors contributed at various levels to different markets, and the models we provided made accurate and reliable forecasts for visitor arrivals by air transport from all studied markets. The results from the markets for Germany, Japan, South Korea and the UK showed that significantly negative tourism demand shocks increased the volatility of tourism arrivals, more than positive tourism demand shocks of equal magnitude. Accordingly, the findings of this study will allow policy-makers in the New Zealand tourism sector and other stakeholders (e.g. airline management) to better understand the impacts on the volatility of visitor arrivals to New Zealand.     

A method for reducing information asymmetry in destination–airline relationships

We propose a measure of business risk in air travel demand at the route level that can reduce information asymmetry during route development negotiations between tourism destinations and airlines. Aviation-exposed risk (AER) conveys information about the level of uncertainty with regard to air travel demand from an airline’s perspective. Using AER, tourism destinations and air service development teams can evaluate their risks from the perspective of the airline and its network. From there, an assessment can be made as to the value of air services in certain circumstances, including whether a direct underwrite or risk share between airlines and destinations is viable and necessary. By applying a portfolio analysis to an airline’s network, we find evidence that AER does indeed mimic the actual capacity distribution of the network. This provides support for AER as a useful risk measure to be used in practice.     

The implications of environmental costs on air passenger demand for different airline business models

Various environmental measures, including both regulations and fiscal instruments, have been used at airports globally to reduce the impacts of aircraft noise as well as aircraft engine emissions. Internationally, it is recognized that the costs of environmental and social externalities of air transport must be internalized and paid for by the aviation industry and its users. The use of noise related charges or taxes, which theoretically should be based on their respective social costs, has been proved to be effective at some European airports. This research aims to investigate the impacts of environmental costs, through environmental charges, on air passenger demand for different airline business models. The paper presents the mathematical models measuring the social costs of aircraft noise and engine emissions as a basis for setting up environmental charges. Six intra-European short-haul routes in two city pairs, namely London–Amsterdam and London–Paris, are selected for the empirical analysis. The environmental charges are then hypothetically applied to airlines with two different business models, full service carriers (British Airways and Air France-KLM) and low cost airlines (EasyJet). The results show that the potential percentages of demand reduction for both leisure and business passengers would be higher for Easyjet's markets, although with less environmental cost per passenger.     

Drivers and barriers to the adoption and diffusion of Sustainable Jet Fuel (SJF) in the U.S. Pacific Northwest

Sustainable Jet Fuel (SJF) represents an important component of the airline industry's strategy to simultaneously reduce GHG emissions while meeting a growing demand for international air travel. SJFs also have the potential to provide fuel supply diversification and security, enhance fuel price stability and provide regional/rural economic development benefits. This paper measures and ranks perceived drivers and barriers to an economically viable SJF industry in a unique U.S. region, the U.S. Pacific Northwest (PNW), through personal interviews with key aviation fuel supply chain stakeholders conducted from June to September 2015. In addition to providing a fertile arena for this first effort to systematically assess these drivers and barriers, the U.S. PNW is unique due to the region's long strategic focus on aviation innovation and its importance to the regional economy, the seminal efforts in the region to outline a path forward on SJF beginning in 2010, and the relatively small population spread over a large geographic area with a limited number of “hub” airport nodes which geographically concentrates aviation fuel demand and distribution. Nineteen stakeholder interviewees acknowledge that, in order for regional SJF adoption-diffusion to occur, airline jet fuel buyers must drive the process, particularly as they deal with greenhouse gas (GHG) emission issues and related policy considerations. Important perceived barriers to SJF industry scale-up in the U.S. PNW include the high production costs of SJF and related issues, such as fuel logistics and quality control in the transport, storage, and blending of SJFs. Perceptions around chain-of-custody issues, such as blending, tracking, and crediting of SJFs and future SJF market share projections for the year 2030 were also examined. Incorporating stakeholder input into discussions about adding blended SJF into the U.S. aviation fuel supply provides needed insight for the biofuels industry, policymakers, and researchers.     

The impact of carbon emission fees on passenger demand and air fares: A game theoretic approach

The implementation of an environmental market-based measure on U.S. aviation industry is studied. Under this policy, each airline pays a carbon fee for the carbon dioxide emissions it generates. The impact on ticket prices and corresponding market shares is investigated via the joint estimation of an air travel demand model and an airlines' behavior model. In the demand model, aggregate air traffic data is used to determine the marginal effects of flight attributes that are specific to itinerary, airline and airport on market share. The airline's behavior model incorporates the carbon fee in the airline marginal cost. After the implementation of the carbon policy, the increased cost forces airlines to adjust ticket prices in order to maximize profits. The results obtained by the proposed model indicate a moderate price increase which strongly depends on the per tonne carbon price. Air travel demand falls from 2.4% to 21% depending on the carbon price level.     

An analysis of essential air service structure and performance

The US federal Essential Air Service program was established to subsidize air service to communities unable to retain commercial carriers after airline deregulation in 1978. In this paper, the subsidized service between program communities and commercial hub airports is investigated relative to several Essential Air Service planning objectives. Specifically, observed community hubbing activity is compared with that modeled to minimize hub access cost and maximize community accessibility within the commercial air transport system. Results highlight trends in system performance relative to these planning objectives and indicate that significant potential exists for enhancing the efficiency of the program in light of limited resources.     

Air transport globalization, liberalization and sustainability: post-2001 policy dynamics in the United States and Europe

Against a context of international crisis in the air transport industry, this paper examines the implications of the ways in which strategies developed by key air transport stakeholders, as well as the contemporary dynamics of the globalized, liberalized market place, impact directly on sustainability issues. More specifically, the paper has two objectives. First, it discusses the policy ramifications of the interrelationships between the concepts of globalization, liberalization, and sustainability within the air transport industry. Second, the paper explores the import of these interrelationships as they interconnect with stakeholder strategies in the differing geopolitical contexts of the US and EU. Particular attention is given to airline network and frequency strategies. The paper concludes that while the financial sustainability of the airline industry is the overwhelming concern today, if this is essentially the short-term crisis that the airline industry claims it to be, the longer-term predictions of air transport growth will again bring environmental sustainability issues to the fore.     

Designing aviation networks under Public Service Obligations (PSO): A case study in Greece

The present paper explores a Greek case study on optimizing the design of aviation networks under Public Service Obligations (PSO). Based on previous research on airline PSO networks applied to the case studies of the Azores and Norway, optimization models are adapted to minimize not only the cost to the airline, but also the total social costs. Different predictive models to estimate demand are developed and included in the optimization models. It is found that after applying the developed demand and optimization models, the total network costs can be reduced significantly, compared to the actual network's operation ranging from 4% to 20%.     

International trade in air transport services: Penetration of foreign airlines into Japan under the bilateral aviation policies of the US and Japan

This study examines the impact of the bilateral aviation framework on passenger air transport service imports focusing on the US and Japan. The US promoted liberalization under its Open Skies framework from the 1980s, while Japan supported phased-in liberalization under the traditional bilateral air services framework. The numbers of US and Japanese citizens flying on foreign carriers has increased. The penetration of foreign imported air services into Japan has been significant. Regression analysis shows that Open Skies liberalization may contribute to the increased US import. Japan's relative market openness, however, makes it difficult to measure the effects of liberalization under a bilateral framework and shows the complex dynamics that may accompany Open Skies policies.     

Privacy policies of air travel web sites: a survey and analysis

Numerous airlines and online intermediaries are using their web sites to sell airline tickets to passengers. From consumer's perspective as well as from regulator's perspective, privacy policies adopted by the online vendors are receiving critical attention. A survey of privacy policies of US air travel web sites indicates that significant differences exist among majors, nationals and intermediaries. Further, air travel industry seems to lag behind other industries in implementing fair information practices. Overall, results suggest that the air travel industry has a long way to go in addressing privacy concerns shared by consumers as well as regulators.     

The impact of airport capacity constraints on future growth in the US air transportation system

This paper simulates airline strategic decision making and its impact on passenger demand, flight delays and aircraft emissions. Passenger flows, aircraft operations, flight delays and aircraft emissions are simulated for 22 airports in the US, under three airport capacity scenarios. The simulation results indicate that most system-wide implications for operations and environmental impact seem to be manageable, but local impacts at congested hub airports may be significant. The response of the air transportation system to avoid airports with high delays could significantly impact passenger demand and air traffic for these and directly dependent airports. The simulations also suggest that frequency competition effects could maintain flight frequencies at high levels, preventing a significant shift toward larger aircraft, which would otherwise reduce the impact of the capacity constraints.     

Identification of critical airports for controlling global infectious disease outbreaks: Stress-tests focusing in Europe

As the global population increases and transportation connectivity improves in quality and prices, the demand for mobility increases, especially in long-haul services. According to the 2017 report of the European Commission in Mobility and Transport, the performance of all modes for passenger transport (roadways and airways) are reaching record highs. Although the benefits of the increased demand for mobility are substantial and welcome, an effort should be paid such as to ameliorate possible threatening side-effects that may also arise. As World Health Organization (WHO) denotes and as has been evident from the global COVID-19 epidemic outbreak, infectious diseases can be spread directly or indirectly from one person to another under common exposure circumstances such as air transportation (especially long-haul airline connections) that may act as the medium for transmitting and spreading infectious diseases. In this paper, analytical and realistic models have been integrated, for providing evidence on the spread dynamics of infectious diseases that may face Europe through the airlines system. In particular, a detailed epidemiological model has been integrated with the airlines’ and land transport network, able to simulate the epidemic spread of infectious diseases originated from distant locations. Additionally, a wide set of experiments and simulations have been conducted, providing results from detailed stress-tests covering both mild as well as aggressive cases of epidemic spreading scenarios. The results provide convincing evidence on the effectiveness that the European airports' system offer in controlling the emergence of epidemics, but also on the time and extent that controlling measures should be taken in order to break the chain of infections in realistic cases.     

An airline's management strategies in a competitive air transport market

Over the last decade, the demand for domestic and international flights in Korea has increased substantially. To meet the strong flight demands, several low cost carriers have begun to offer flight services. In addition, full service carriers have been motivated to establish their own subsidiary low cost carriers to maintain their market share against rival low cost carriers. This paper studies the management strategies of three kinds of airlines - full service carrier, its subsidiary low cost carrier and rival low cost carrier - based on game theory in the competitive air transport market. Each airline is assumed to act as a player and chooses strategies regarding airfare, flight frequency, and the number of operating aircrafts for specific routes while maximizing its own profits. Demand leakages between the airlines are considered in the flight demand function according to the selected strategies of all airlines. Through various game situations reflecting realistic features, this study provides managerial insights that can be applied in the competitive air transport market.     

Spanish air travel and the September 11 terrorist attacks: a note

This paper studies the impact of the September 11 terrorist attacks and its after-effects on Spanish airline demand. Using monthly time series data from 1980–2003, we find that September 11th resulted in an ongoing negative demand shock although smaller than that experienced in the US but particularly in relation to international passengers.     

Have the major forces driving leisure airline traffic changed?

Here, we examine the major forces that are driving leisure airline traffic to assess whether these have changed in recent years. Initially this is undertaken by considering global patterns of airline and tourism demand and then by a more detailed investigation of the UK situation. The research indicates that airline demand is becoming less sensitive to income changes and also that the share of income spent on air travel is not showing much growth. Both of these suggest that airline demand may be becoming more mature, with growth being increasingly driven by price reductions rather than income changes. Moreover, evidence from the UK shows that changing customer preferences, and subsequent industry developments to accommodate these, appear to be having a significant impact on the demand for different types of leisure air trips.     

Air transportation and urban-economic restructuring: competitive advantage in the US Carolinas

The theoretical agenda of this paper is to bring airports and airline operations more squarely into the mainstream of the urban and regional development literature. The paper examines the spatial and temporal patterns of air passenger flows by airport in the US Carolinas. An emphasis is placed on articulating the linkages that exist between airport operations at the local level, the structural composition of the regional economy, and the competitive strategies of the airline industry. Particular attention was paid to administrative and auxiliary employment levels because it is a knowledge-based producer service that tends to seek out markets that offer high levels of air service connectivity to other places. A major finding in this paper is that those US Carolina airports that experienced significant gains in air passenger volume (e.g., Charlotte and Raleigh-Durham) tended to experience comparable gains in the employment levels of administrative and auxiliary workers, particularly in the manufacturing sector.     

Best practice benchmarking: a route to competitiveness?

This paper examines the use of best practice benchmarking as an approach to performance improvement in the airline industry. The case study draws upon phenomenological evidence from the aircraft maintenance section of Britannia Airways. A range of benchmarking issues, which could be applied to different divisions of an airline are highlighted. In particular, inter disciplinary team building, employee involvement, relationships with other industry players and identification of `best in class'. Airline alliances and the global trend towards economically deregulated air transport are identified as factors likely to increase the adoption of benchmarking as a route to competitiveness.     

Introduction to the special issue: Air transport in the Global South

Research on the development and impacts of air transport has hitherto focused mainly on developed countries in the Global North, and relatively little on less developed countries in the Global South. The seven papers of this Special Issue of the Journal of Transport Geography aim to address this imbalance and encourage further research on air transport development in the Global South. In recent years, the Global South has witnessed significant changes in air transport networks and policies, with implications for economic growth, spatial development and airline business models. This Special Issue explores some challenges to air transport development in the Global South for countries in Africa, South America, the Middle East and Asia, including links between air transport and economic development, the evolution and key drivers of air transport growth and the spatial distribution of passenger airline networks, and the development and impact of low-cost carriers. It also identifies opportunities for future research in this growing area.     

An efficient airline seat reallocation algorithm considering customer dissatisfaction

Nowadays, many airlines tend to provide an advance seat selection service to maximize customer satisfaction to secure market shares in the competitive air transport market. However, the preassigned seat configuration of certain flight legs can be changed often due to aircraft changes for certain reasons, such as maintenance and reservation rates. Then certain customer's seat features, such as row location, position of aisle/window, relative location, and position with the same group member can be different before/after the change, and it can lead to huge customer dissatisfaction. Therefore, an efficient airline seat reallocation algorithm to minimize customer dissatisfaction is introduced in this study, which is based on mathematical model-based optimization with several types of objective functions that reflect customer dissatisfaction levels. A numerical example is performed to validate the developed airline seat reallocation algorithm, and an additional analysis is also executed to derive important insight.