Are passengers willing to pay more for additional legroom?

This paper investigates whether or not the efforts by two of the largest US airlines to increase seat pitch (i.e. legroom) across their aircraft fleet during 2000 resulted in fare premia relative to the other ‘full service carriers’. Using panel data from 1998 to 2002, we estimate fixed-effects regressions in markets with overlapping service between large hub and spoke carriers and find that United's ‘Premium Economy’ program was more successful than American's ‘More Room Throughout Coach’ program at generating fare premia.     

New-entrant airlines’ life-cycle analysis: growth, decline and collapse

Many new-entrant carriers enjoyed fast growth and by the same token sudden failure, therefore raising interest in the characteristics of their life cycles. The article proposes a different approach to life-cycle analysis of airlines by integrating an ‘evolution path’ based on size classification with a ‘traditional life-cycle path’ that assumes two distinctive routes to failure. On the basis of a survey conducted among managers of new-entrant airlines in Europe and the USA, various factors were identified that showed significant differences between stages of evolution. The findings do support that new-entrant airlines have similar life-cycle characteristics as firms in general.     

Fares and tolls in a competitive system with transit and highway: the case with two groups of commuters

This paper deals with pricing and modal split in a competitive mass transit/highway system with heterogeneous commuters. Two groups of commuters that differ in their disutility from travel time, schedule delay and transit crowding, select the transit or auto mode for traveling from a residential area to a workplace. We compare three pricing schemes: the marginal cost-based transit fare with no-toll (called ‘m’ for short), the average cost-based fare with no-toll (‘a’) and marginal cost-based fare with time-invariant toll for subsidizing transit (‘s’), and derive a socially optimal combination of transit fare and road toll which minimizes the total social cost of the competitive system meanwhile ensuring no deficit to the transit side (‘o’). The main findings from the analytical and numerical results are: (1) the ‘o’ policy generates the most total transit usage, then ‘s’, ‘m’ and ‘a’ in order; (2) the total usage of each mode is independent of the demand composition when group 1 uses both modes; (3) the group 2’s aversion to transit crowding does not affect total transit usage; (4) group 2 has relatively larger welfare gains from some changes in pricing policy, such as changing ‘m’ to ‘s’ or to ‘o’; (5) the a-policy results in the highest total social cost, then ‘m’, ‘s’ and ‘o’ in that order.     

A productivity comparison of the world's major airlines

This paper measures and compares productivity and unit cost of the world's 23 major airlines using yearly panel data (1986–1993). An extensive effort was expended to put together a reliable database. These data are then used to accomplish the following: first, unit cost per unit of aggregate output is measured and compared. The effect of input price changes on the unit costs are also examined. Second, the ‘gross’ Total Factor Productivity (TFP) is measured and compared. In order to compare true productive efficiency across airlines and over time, a ‘residual’ TFP index is computed after removing effects of the variables beyond managerial control such as average stage length and composition of outputs. Log-linear TFP level, and TFP growth rate regressions are used to accomplish this task. Our results show that:

1. (a) during the sample period (1986–1993), the major European carriers and the carriers in newly industrialized countries in Asia have achieved significantly higher productivity growth than their North American counterparts;

2. (b) as a result, the productivity gap between North American and other carriers have diminished significantly;

3. (c) however, on average, the North American carriers still enjoy higher productive efficiency than the carriers in Asian NICs and European carriers, but the gap is closing very rapidly; and

4. (d) it is observed that, over time, the productive efficiency of carriers competing in the same markets tends to converge.

Finally, Asian NIC carriers clearly enjoy unit cost advantages over other major carriers. Our results show that European aviation liberalization which began in 1987 appears to have produced substantial productivity gains.     

Scatters and clusters in time and space: implications for delivering integrated and inclusive transport

This paper calls for a refinement in the literature on social exclusion/inclusion, and an alteration in the counterpart policy practices, in order to take account of ‘scatter’ and ‘cluster’ dimensions in the patterning of transport deprivation. Disaggregating social exclusion and inclusion data to enable the identification of scatters and clusters is key to the development of appropriate transport planning strategies. The degree to which lack of mobility is scattered or clustered can have profound implications for the ways in which time and space are treated by policy.     

Does quality pay? The case of the dry bulk market

Following important changes in the safety regulation of tankers, the dry bulk sector is coming under the spotlight in a safety and quality perspective. Nominal freight differentiation between ‘quality’ and ‘other’ tonnage has been observed occasionally and much lip service has been paid to promoting the need for younger and safer ships. Whether or not these signals actually manifest in a market initiative for the enhancement of the standards of the world bulk carrier fleet is debatable. This paper investigates the possible existence of a two-tier spot freight market for medium and large bulk carriers of differing age. Known voyage fixtures are investigated for four representative years since the end of the 1980s, during which contrasting freight market conditions prevailed. In all but very few cases, there was no statistically significant difference between rates paid to older and younger tonnage. In those few cases where such differences were statistically significant, they never exceeded 10%.     

Integrating frequent flyer programs in multilateral airline alliances

Forming branded alliances has become a common strategy in the airline industry. These can be defined as ‘multilateral alliances’ as opposed to bilateral alliances. Limited attention has been paid to assessing the impact of multilateral alliances on complex sub-networks, such as distribution networks, cargo alliances and frequent flyer programs. These sub-networks are ‘derivative networks’ within multilateral alliances. These derivative networks create several dilemmas as they evolve causing airline managers to confront fundamental questions regarding harmonization, conflict resolution, and organizational structure.     

Travel behavior within Canada’s older population: a cohort analysis

The unprecedented demographic change of the aging Canadian society has raised numerous questions, including the provision of health care and the national pension plan to an increasingly large older population. Surprisingly, however, there is little Canadian literature regarding the travel behavior of its older population, an oversight that this paper addresses. Using the 1986, 1992, and 1998 General Social Surveys and pseudo-cohort methods, this paper addresses changing driving behavior among older Canadians, and compares the ‘old’ and ‘transitional old’ to younger-aged cohorts. Results indicate that while older Canadians undertake fewer trips, and travel for different reasons than those in the labor force, their reliance upon the private automobile for transportation is no less significant. Specifically, we demonstrate that the number of trips by car with older drivers increase over the study period as the population ages.     

Airports Council International, Greenport ’99 conference and exhibition – thinking green – strategies for balanced airport development in the next century, Amsterdam, The Netherlands 21–23 April, 1999

Airports Council International (ACI), ‘The Voice of the World’s Airports', is the only professional airport association in the world. ACI was formed in 1991 when the Airport Operator’s Council International (AOCI), the International Civil Airports Association (ICAA), and the Airport Associations Co-ordinating Council (AACC) merged to represent the world’s airports. ACI is based in Geneva, Switzerland with geographical regions in Africa, Asia, Europe, Latin America/Caribbean, North America, and the Pacific. Currently, ACIs membership consists of 528 members operating 1300 airports in more than 160 countries. ‘Greenport ’99’, the first conference of its kind, brought together organisations from around the world to discuss the future of airport development and its impact on the environment in the 21st century.     

Assessment of passenger benefits brought about by international airport projects

This study sets forth a method to calculate the passenger benefits of an international airport project and assesses the passenger benefits brought about by two international airport projects.An international airport project mainly increases the number of flights and the possibility of determining convenient timetables. It does not significantly decrease the flight time of international travel. Thus, the user benefits brought about by an international airport project cannot be expressed by the conventional concept of ‘traveling time’, which is the term generally used.In this study, the ‘Expected Value of Traveling Time’ and ‘Expected Value of Generalized Cost’ are presented as indexes to evaluate improvements in convenience brought about by international airport projects. The passenger benefits of two airport projects in Japan are measured by consumer surplus calculated from the demand function using these indexes.These indexes are accurately calculated taking into consideration factors such as scheduling connections between domestic and international transport, and so enable a grasp not only of reductions in flight time, but also of passenger benefits resulting from international airport projects, such as increases in the number of flights and reductions in the time required to make transfers during domestic travel.     

A case study of pricing strategies in European airline markets: The London – Amsterdam route

Published fares London–Amsterdam are used to examine the pricing practices of low-cost and legacy carriers when operating in a large and crowded market. We investigate two strategies of market segmentation involving the time before departure the ticket has been bought, inter-temporal segmentation, and the duration of the stay, implicit segmentation. We find inter-temporal price discrimination emerges as an important strategy for all pricing but the two legacy carriers involved, British Airways and KLM, differ in their use of stay restrictions; British Airways does not assign a specific role to the duration of stay, while KLM make use of such rules extensively in price setting.     

Carriers’ pricing behaviors in the United States airline industry

This paper examines the pricing behaviors of United States air carriers in domestic markets. With quarterly observations in 2000 and 2005, we use a heteroskedasticity-adjusted Instrumental Variable technique to investigate the carriers’ pricing strategies. The results show differential pricing strategies practiced by United States air carriers. American, United, Continental, and Northwest Airlines have higher airfares than Delta and Southwest Airlines in 2005. In 2000, all the carriers, except Delta have the same relationships with airfares. Furthermore, the findings suggest that the carriers’ pricing strategies can vary under the same market condition, indicating that carriers’ managerial decisions may influence their airfares.     

Spatial evolution of airport traffic and air transport liberalisation: the case of Greece

This paper explores the evolution of airport passenger traffic in Greece over the period 1978–2006. The country is a member of the European Common Aviation Area, but despite air transport liberalisation, spatial concentration of traffic and asymmetry remain high and have not decreased significantly over time. Greece is still short of traffic generated by low-cost carriers especially outside the main metropolitan airports. The paper argues that further dispersion of traffic could be possible primarily in the mainland if low-cost carriers decide to dynamically enter the Greek market. Potential benefits for regional and tourism development should induce policy makers to work towards this direction.     

Mobility management outside metropolitan areas: case study evidence from North Rhine-Westphalia

In recent years ‘mobility management’—a means of promoting modal shift and alternatives to the journey—has gained importance in continental Europe. Especially in metropolitan areas this approach is seen as a way of improving the effectiveness of traffic system management measures. This paper outlines some key options and constraints of transferring mobility management to rural regions, drawing on evidence gathered from a research and demonstration project currently underway in rural regions of North Rhine-Westphalia. Basic conditions for implementing mobility management in rural regions as well as preliminary findings are presented.     

The Warsaw limit: medieval unbreakable and unconscionable

The role of the Warsaw Convention in the modern world is increasingly under scrutiny. This paper focuses on the carrier's right to limit its liability under Warsaw as amended by the Hague Protocol, and examines three questions in particular. First, what are the origins of limitation of liability? Second, can one can ever really hope to break the limit under Article 25 of the Warsaw Convention? Third, can we really justify limiting passenger claims any longer? The answer to the first question is ‘medieval’ and the (not unsurprising) conclusion on the second and third questions is ‘no’ to each. The notion of breaking the limit is a chimera. And the notion that the present regime of limitation against passenger claims under Warsaw should continue to exist into the 21st century is, to the author's mind (and others), unthinkable. The industry must address the disquiet regarding limitation of passenger claims before the momentum to sweep away all forms of limitation becomes unstoppable.     

The baggage system at Denver: prospects and lessons

This article discusses the fundamental design difficulties of the fully automated baggage system originally planned for the New Denver Airport, and their implications for airport and airline management. Theory, industrial experience, and the reality at Denver emphasize the difficulty of achieving acceptable standards of performance when novel, complex systems are operating near capacity. United Airlines will thus make the Denver system ‘work’ by drastically reducing its complexity and performance. Automated baggage systems are risky. Airlines and airports considering their use should assess their design cautiously and far in advance, and install redundant, supplemental systems from the start.     

Optimal fares regulation for Britain’s railways

This paper reports the findings of an economic evaluation of fares regulation options for Britain’s railways. The evaluation is based on the development of an econometric demand model based on a large scale survey of passenger preferences. The model was applied to comprehensive case study analysis of candidate fares regulation options based on the notion of a ‘fares basket’ and it was found that for any given price cap, any specific objective of revenue generation will be attained with lower welfare penalty if the basket is defined widely rather than narrowly.     

Price premiums and low cost carrier competition

This study presents a time series examination of price premiums in the US airline industry. Price premiums are defined as price markups due to domination and concentration at the airport and route market levels. The differential effect of these price premium drivers is empirically investigated, and it is shown that the largest components of price premiums are those from airport market share and airport concentration. The effect of low cost carrier competition on the level and composition of price premiums is of particular interest in this study. The results indicate that low cost carriers do not charge price premiums, and that high cost carriers’ price premiums tend to be lower when there is competition by low cost carriers. While the absolute values of price premiums have been fairly constant over the 1992–2002 time frame, the proportion of US passengers subject to price premiums has decreased due to the increasing share of low cost carrier traffic.     

Do low cost carriers have different corporate governance models?

In this paper, we investigate whether different business models in the same industry (passenger air transportation) lead to different corporate governance models. We found that low-cost carriers organise their boards differently from full service carriers to achieve lower costs and a faster decision-making process that is required by their business model. We also found that low-cost carriers and full service carriers solve their potential agency cost problems differently and that full service carriers have more board monitoring committees, and low-cost carriers have a closer coincidence of interests between shareholders and executive directors.     

Legacy carriers fight back: Pricing and product differentiation in modern airline marketing

The adoption of the low-cost carrier business model has applied competitive pressure on established network or “legacy” carriers, by offering fares at prices that legacy carriers find it difficult to match and still cover their fixed costs. This paper reports how two medium-sized national airlines-Air New Zealand and Air Canada-have coped with the low-cost threat by, in effect, turning their fixed costs into profit centres. Features such as full regional networks, long-haul connections, frequent flyer programs, membership in global alliances, lounges and business class cabins can be bundled into products which can be marketed and sold profitably to business and even some leisure travellers, and which cannot be easily replicated by low-cost carriers. Although not panaceas, the innovations of Air New Zealand and Air Canada to the competition they face in their domestic and trans-border markets demonstrate the possibility of an effective legacy carrier response to the low-cost carrier business model.