A Multi-Objective Goal Programming airport selection model for low-cost carriers’ networks

This paper examines the practicability and validity of the Multi-Objective Goal Programming (MOGP) model in designing a point-to-point airline network. The MOGP mathematical model is used in this study to identify and select a best central airport and its connecting airports providing the best overall optimal performance. By using the proposed model in the selection process, one can expect to achieve the following objectives: (1) an airline network designed at less cost, (2) an airline network that generates more revenues, and (3) an airline network that serves more passengers. Route data from Taipei to the Southeast Asian region were selected for this experiment to validate the model’s practicability.     

The airfare pricing and seat allocation problem in full-service carriers and subsidiary low-cost carriers

This study investigates the competitive market situation in the air transport industry considering full-service carriers (FSC), subsidiary low-cost carriers (LCC) and rival LCCs on the flight-leg level while subsidiary LCCs are established by FSCs against rival LCCs to keep the market share and to make more profit. It is assumed that the demand of economy class for each airline follows a known distribution, and the mean value of that distribution is a function of its airfare and the airfare differences with other airlines. In addition, no-shows and cancellations are introduced to reflect a real situation. Based on this situation, a mathematical model is developed to derive efficient airfare pricing and seat allocation for each airline for maximizing the profit sum of both FSCs and subsidiary LCCs using a repeated game. A repeated game model integrated with a Tabu search algorithm and an EMSR based heuristic is suggested to deal with the proposed repeated game. A numerical example is provided to validate the model and solution procedure with hypothetical system parameter values under two kinds of market situations that show before and after the emergence of subsidiary LCCs.     

Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression

Between 2001 and 2005, the US airline industry faced financial turmoil while the European airline industry entered a period of substantive deregulation. Consequently, this opened up opportunities for low-cost carriers to become more competitive in the market. To assess airline performance and identify the sources of efficiency in the immediate aftermath of these events, we employ a bootstrap data envelopment analysis truncated regression approach. The results suggest that at the time the mainstream airlines needed to significantly reorganize and rescale their operations to remain competitive. In the second-stage analysis, the results indicate that private ownership, status as a low-cost carrier, and improvements in weight load contributed to better organizational efficiency.     

Codesharing agreements by low-cost carriers: An explorative analysis

In this paper, we present an explorative analysis related to the involvement of low-cost carriers (LCCs) in codesharing agreements. Our goals are to evaluate the diffusion of the phenomenon across countries, and to identify the determining features of companies with regards to the codesharing propensity of LCCs. We analyzed the worldwide scheduling of LCCs in 2011, revealing that one-third of LCCs were involved in codesharing arrangements in 2011. Yet, only 25% of LCCs are involved in codesharing with carriers to whom they are not hierarchically linked. The spread of this phenomenon varied by geographical area, with LCCs in Europe, Australia–New Zealand, Asia, and North America being most likely to codeshare. The airline size, the hybridization of the carrier's business model and an airline network concentration affect the likelihood to codeshare.     

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.     

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.     

Airline type and tourist expenditure: Are full service and low cost carriers converging or diverging?

Since some years ago low-cost carriers (LCCs) are becoming less and less low-cost-like, as well as full-service airlines are becoming less and less full-service-like, thus contributing to lessen the differences between users of one airline type and the other. LCCs have made air travel available to all budgets and enabled tourists to spend more at destination by reallocating their trip expenditure. The objective of this article is to observe if airline types have been converging regarding travellers’ expenditure allocation and total trip expenditure. We use repeated cross sections of the Spanish tourist expenditure survey between 2006 and 2014, and compositional data analysis with a total in order not to confound effects involving expenditure allocation with those involving expenditure volume. Results show that users of both airline types converge in their allocation of the trip budget (between transportation and at-destination expenses, and within at-destination expenses), but diverge with regard to total trip expenditure.     

Relevance of route and network profitability analysis for the network management process of network carriers

Route profitability analysis (RPA) and network profitability analysis (NPA) represent common approaches to measure the profitability of flights in the airline industry. Scientific discussion, however, lacks an in-depth understanding of their impact on the network management process or of their implementation throughout the industry and their design. Here we analyze RPA and NPA and evaluate their potential influence on network management-related decision making. We argue that both approaches vary in applicability and suitability according to airline business models (i.e. network carriers, point-to-point carriers). Furthermore, we present the findings of a study among the top 100 network carriers worldwide on the relevance of RPA and NPA. Results indicate a wide implementation of RPA and to a lesser degree of NPA. In addition, the sophistication of the profitability analysis and the application of the retrieved profitability data for planning purposes differ considerably between airlines.     

The evolving landscape of Chinese aviation policies and impact of a deregulating environment on Chinese carriers

This paper examines the recent developments of China’s aviation polices focusing on airline consolidation, the opening up of the domestic aviation market, and the adoption of more liberal international aviation policy. It then goes onto assess the impacts of the above policies on the industry structure, the performance of major airlines, and the competitiveness of Chinese airlines in international markets. The study shows that the industry became more competitive following the opening up of the domestic aviation market. Although major airlines saw an increase in passenger volume and an improvement in load factors, the falling yield and rising costs make them difficult to grow profitably. Moreover, Chinese airlines largely failed to capitalise on building an international network and the majors were weak in international competition. Strategic use of aviation policy to build a strong and profitable airline industry is still a formidable task lying ahead for policymakers.     

Evolving competition between low-cost carriers and full-service carriers: The case of South Korea

This study explores the impact of domestic low-cost carriers (LCCs) on regional tourism and aviation industries. In particular, it articulates the changing competitive dynamics between LCCs and full-service carriers (FSCs). The Lotka-Volterra (LV) model, utilising the newly proposed moving-window concept, is used for the assessment of the influence of LCCs on the South Korean and airline industry. Analysis results demonstrate that the competitive dynamics between LCCs and FSCs are not static and have evolved over time. The study proposes an efficient and effective change analysis and enables strategic planning for aviation industries.     

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.     

The business passenger niche: Comparing legacy carriers and southwest during a national recession

We examine how legacy and low-cost air carriers’ roles in serving business passengers in the US changed during the global economic recession from 2007. Quarterly data is examined to test the impact of a recession on the air travel behavior. We find that since 2007 business passengers represent a declining proportion of legacy carriers’ passenger volume, while they represent an increasing proportion of Southwest’s passengers. This trend suggests that Southwest’s market niche has shifted, and that the airline now plays a role similar to that of legacy carriers.     

Segmentation of passengers using full-service and low-cost carriers – Evidence from Taiwan

Low-cost carriers in Taiwan have rapidly drawn a large number of passengers away from full-service carriers in recent years. However, many passengers still stick with traditional airlines as their primary air carriers. These two groups of passengers should differ in terms of their personal and trip characteristics, valuations of factors in determining an airline, and perceptions of need for ancillary services. The present paper compares the profiles of passengers using different types of air services in Taiwan using data collected from an online survey and assesses the potential of principal component analysis with biplot technique to define different passengers based on their preferences of services and valuations of the importance of factors. Our study shows that passengers of full-service and low-cost carriers have different trip characteristics; principal component analysis is applicable for this context of passenger profile segmentations.     

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.     

Factors influencing the intentions of passengers regarding full service and low cost carriers: A note

This study investigates discrepancy in factors affecting passengers' intensions regarding using full service and low cost carriers. A conceptual model, that originally focused on the former, is adopted and slightly revised according to the service properties of low cost carriers. To validate the revised model, a questionnaire survey on passengers of Spring Airlines, the first low cost airline in China, was conducted. The results indicate differences in attitudes towards full service and low cost carriers. Service perception is a latent variable with the most significant influence on intentions about using full service carriers, but exhibits less effect on intentions regarding low cost operators. Conversely, service value exerts the greatest effect on intentions for possible low cost passengers.     

Investigating the effects of service recovery quality elements on passengers' behavioral intention

This study intends to analyze how the elements of restoring the quality of airline service influences the airline image, recovery satisfaction, and behavioral intentions of airline passengers. For this testing, a survey was conducted on passengers with an experience of dissatisfaction of airline services. A total of 240 responses were analyzed by using structural equation modeling. The results revealed that among the recovery quality elements, promptness had a positive influence the image of the airline. Additionally, a recovered image of the airline had a positive influence on the recovery satisfaction and behavioral intention. The findings of this study may improve our understanding of consumer responses to the airline company's efforts to recover service failure.     

Predicting airline passengers’ loyalty using artificial neural network theory

The study explores a model for predicting airline loyalty using the antecedents indicated in previous studies. Data was collected using a questionnaire distributed to 614 domestic air passengers using the snowball sampling method. The measurement tool had 16 scale items constructed on the recommendations of previous studies. Passenger satisfaction, airline service quality, passenger perceived value, and airline image are identified as determinants for airline loyalty. The predictive analytical approach of Artificial Neural Network theory and covariance-based Structural Equation Modelling for determining causality is employed in the study. The artificial neural network model predicts airline loyalty with 89% accuracy. Sensitivity analysis suggests passenger satisfaction as the most significant predictor of airline loyalty. The causal study supports that passenger satisfaction mediates the relationship between airline service quality and airline loyalty.     

Inventory optimization for a customer airline in a Performance Based Contract

The supply of spare parts has a crucial role in the aviation sector, mainly due to the high costs of spare parts and to the strict availability requirements. In a stand-alone scenario, an airline owns the spare parts and manages the maintenance tasks by itself. A new trend consists of not owning the spare parts and delegate the maintenance tasks to an external company, taking advantage of a specific Performance Based Contract (PBC). The PBCs aim to reduce the ownership cost for the customer airline, while ensuring a target system performance. Spare parts become a variable cost for the customer airline and a business income for the maintenance supplier, which is commonly another airline.This paper proposes an innovative model, i.e. the PBC-METRIC, which supports the customer airline manager to minimize the spare parts supply cost, in compliance with the airline availability requirements and with respect to the PBC. In detail, the PBC-METRIC models a multi-echelon, multi-item, single-indenture, multi-transportation network, by an innovative two-steps algorithm, defining the PBC specifications as modelling variables and parameters. A case study on a European airline, with the role of customer in a PBC, illustrates the outcome of the model.     

Airport–airline vertical relationships,their effects and regulatory policy implications

This paper examines the forms and effects of vertical relationships between airports and airlines with a focus on the North American and European aviation markets. We find that such vertical relationships enables those participating to achieve various benefits and may be formed as a competitive response to other competing airport–airline alliances. In some cases, vertical airport–airline relationships strengthen the hub status of major airports, leading to increased employment and service quality in local markets. On the other hand, preferential treatment of a particular airline by an airport may enhance that airline’s market power, allowing it to dominate the airport and charge hub premiums. The competition and welfare implications of airport–airline vertical alliances can be complicated and two-sided, subject to the influences of other factors such as the market structures of the airline and airport markets.     

The effect of frequent flyer programs: A case study of the Korean airline industry

Frequent flyer programs are important for airlines in Korea in their marketing of services. This paper develops a conceptual model to investigate the effect of such programs by examining the relationships them and, airline service quality, pricing, passenger satisfaction, airline image, and airline selection. Path analysis is used to analyze data collected from Korean international air passengers. The results show that frequent flyer programs have direct and indirect effects on pricing, passenger satisfaction, airline image, and airline selection. In addition, their effects on passengers' selections are significantly different between Korean and foreign airlines.