Charting a New Paradigm of Container Hub Port Development Policy: The Asian Doctrine

This paper proposes the conceptual model of the Asian (Port) Doctrine to explain the successful development of top ranking container ports in Asia during the past four decades. This paper draws a new paradigm for the role of government as a third governance approach in addition to Anglo-Saxon and European doctrines by describing how Asian countries have developed container hub ports by investing in infrastructure as social overhead capital to support export-led growth. We survey characteristics and outcomes in major Asian container port developments and one European port in terms of a port development policy. The findings are presented in a comparative overview of government investment in functional elements of port, maritime infrastructure and landside connections to container ports. This paper confirms that the existing two doctrines—Anglo-Saxon and European doctrines—are not sufficient to explain the Asian success in major container port developments. The proposed framework contends that a newly proposed Asian Doctrine can accomplish this with the help of cross-subsidization, strategic and administered port pricing mechanism.     

Evaluating the competitiveness of container ports in Korea and China

Changes in world trade and the shipping environment have created ever-increasing competition between ports in North-east Asia, especially Korea and China. Following intensive state investment in port developments through large-scale projects, Chinese ports now threaten to oust Busan in Korea as the regional hub. To identify and evaluate the competitiveness of major ports in the region, this paper identifies the components influencing their competitiveness and presents a structure for evaluating them. Based on the literature related to port selection and competition, a regional survey of shipping companies and owners employed factor analysis to reveal that port service, hinterland condition, availability, convenience, logistics cost, regional centre and connectivity are the determining factors in these regions.     

Finding potential hub locations for liner shipping

The current models for hub location problems are unable to find potential hub locations in uncharted areas that currently have no port. To explore hub locations that are not selected from the present ports, this study proposes a two-stage method to address this gap in knowledge. A concave cost multicommodity network flow model is solved in the first stage to obtain container traffic in waterways. Then, in the second stage, a hubbing probability is evaluated for each node to indicate potential hub locations. A case study including emerging Arctic routes is provided to demonstrate this method.     

Container Terminal Development in Mainland China and Its Impact on the Competitiveness of the Port of Hong Kong

In recent years, China's container ports have experienced a significant expansion in throughput and capacity. This paper provides a review of the sector and analyses the recent development of container ports and terminals within Mainland China. It then focuses in more depth on the competition between the ports of Shenzhen and Hong Kong. In particular, the port of Shenzhen is analysed in the context of Robinson's criteria for hub port development to try to discern whether it will become the dominant regional hub. The discussion concludes that despite Shenzhen's current competitive advantages, Hong Kong will, in all probability, retain its dominant role.     

A continuous approximation model for time definite many-to-many transportation

Time definite freight transportation carriers provide very reliable scheduled services between origin and destination terminals. They seek to reduce transportation costs through consolidation of shipments at hubs, but are restricted by the high levels of service to provide less circuitous routings. This paper develops a continuous approximation model for time definite transportation from many origins to many destinations. We consider a transportation carrier serving a fixed geographic region in which demand is modeled as a continuous distribution and time definite service levels are imposed by limiting the maximum travel distance via the hub network. Analytical expressions are developed for the optimal number of hubs, hub locations, and transportation costs. Computational results for an analogous discrete demand model are presented to illustrate the behavior observed with the continuous approximation models.     

How could the collaboration between airport and high speed rail affect the market?

This paper discusses the possibility of collaboration between airport and high speed rail (HSR) to improve the airport’s gateway function. We apply the model which consists of three players, carriers, passengers, and the airport. In order to estimate the impact of the collaboration, we carry out some numerical computations with the model under the twin hub three zones network. Our results show that the collaboration between HSR and the smaller demand airport can reduce the congestion at the bigger demand airport, which suggests the collaboration can be preferable for carriers and passengers; it would improve the social welfare.     

Airport privatization in congested hub–spoke networks

This paper investigates the airport privatization issue. One congested hub and two linked local airports serve symmetric hub carriers. Passengers valuate the congestion delay cost and benefit from greater frequencies. The government considers privatizing either the hub or local airports. We find that in each privatizing scenario, welfare-maximizing public airport(s) set a charge below their operating costs in order to fully coordinate the high charge of privatized airport(s). If this fiscal deficit is not allowed, each scenario causes distortion. Interestingly, the distortion—and hence welfare losses—in privatizing a hub are smaller (larger) than those in privatizing both local airports when both passengers’ valuations are small (large); this is exactly the case when privatized local airports are strategic substitutes (complements). We also surprisingly find that retaining the hub airport as public and privatizing one or both local airports achieves the same market outcomes. We further find that if all airports are privatized, welfare becomes worse than the other scenarios; the hub airport charges lower (higher) prices than local airports when both local airports are strategic substitutes (complements).     

Factors affecting the operational success of strategic airline alliances

With increased liberalisation in major air transport markets, the intensity of competition has increased amongst air carriers. Airlines have responded to the competitive pressures in many ways, one of which has been the formation of alliances. These alliances are linkages between the firms at various operational levels. They go beyond the common interlining agreement to encompass certain marketing and cost-reducing features. However, the question is how the success of these alliances can be ensured? While companies' culture compatibility is important and much has been written in that area, this paper focuses on factors that affect operational success of airline alliances. The operational success is measured by the change in the level of partners' inter-hub traffic due to formation of the alliance. This research has developed a methodology which could be used as a management tool to measure alliances' operational success before embarking on such agreements. The analysis of recent major alliances covering 52 inter-hub routes suggests that the main factors ensuring the alliances' operational success are: the partners' network size and their compatibility, the frequency of service between the hubs of the partners, the flight connection time at the hub and the level of competition on their network.

     

Port privatization,efficiency and competitiveness: Some empirical evidence from container ports (terminals)

Few studies have investigated the quantitative relationship between port ownership structure and port efficiency with mixed results. This study applies a stochastic frontier model proposed by Battese and Coelli [Battese, G.E., Coelli, T.J., 1995. A model for technique inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325–332], which incorporates the inefficiency effect, to show whether port privatization is a necessary strategy for ports to gain a competitive advantage. While this stochastic frontier model has been used to a wide number of industries where the technical inefficiency effect is required, this method has rarely been employed to port industry. This study also investigates the determinants of port competitiveness. Both the principal component analysis (PCA) and the linear regression model are used to examine the effects of identified key factors on port competitiveness. Based on a sample of selected container terminals around the world, the results of this study have shown that private sector participation in the port industry to some extent can improve port operation efficiency, which will in turn increase port competitiveness. Another important determinant of port competitiveness is the adaptability to the customers’ demand. All these results provide some policy implications and guidance for port authorities and port operators in formulating effective strategies to improve their competitiveness vis-à-vis rivals.     

Congestion spill effects of Heathrow and Frankfurt airports on connection traffic in European and Gulf hub airports

We develop two stage fixed-effects single-spill and double-spill models for congestion connection spills of London Heathrow and Frankfurt airports on 9 hub airports in Europe and the Gulf. Our panel data covers connection traffic from 1997 to 2013 for Heathrow and 1997 to 2011 for Frankfurt. The single-spill results support strongly that the connection spills from Heathrow’s capacity limitations do strengthen competing hub airports of major alliance groups and to a lesser degree one Gulf hub. The double-spill model for Heathrow and Frankfurt shows nearly asymmetric overall spill characteristics between the two airports. Our results underline the influence of airline network strategies on congestion spills as European airline networks are shaped by alliances and umbrella mergers. Thus, the airline network perspective in airport capacity expansion decisions needs to play a greater role, as indicated by our asymmetric results for overall spill effects between Heathrow and Frankfurt airports.     

Fuel burn and environmental implications of airline hub networks

Hubs act as switching points for interactions and so are places through which flows are concentrated. This research uses the interactions between a system of cities as an experimental context for understanding selected environmental costs and benefits of concentrated flow. Whether hub based networks create additional environmental costs has been debated in the literature. In this paper, fuel burn is used as an indicator of environmental cost. The essential ideas are: (1) to examine fuel costs associated with larger aircraft; (2) to determine implications of higher loads on dense routes; and (3) to model the resulting implications for hub and gateway location. Variants of these questions apply to passenger and freight flows, and the paper will initially concentrate on passenger models.The paper shows that by modeling fuel burn and introducing a fixed charge (like a set up cost), a multiple allocation hub and spoke model can be adjusted to direct more or less flow onto the inter-facility connector. In other words, usage of multiple connections and direct links can be controlled and modeled as a function of the fixed charge. The resulting networks are characterized by quite different levels of passenger miles, aggregate fuel burn and fixed charges. The preferred network in terms of minimal fuel burn is found by subtracting the fixed set up charge, thereby focusing attention on the modeled fuel burn. The lowest cost set up is a network with a high degree of connectivity, and a pure single assignment hub network has the highest fuel cost (as a result of larger passenger miles needed by connecting paths). The data also allow a tabulation of total passenger miles, which, not surprisingly, track very closely with the fuel burn. In an interesting application of the ideas, it is shown that a fuel efficient network may require a large number of smaller regional jets, and in the interests of avoiding noise and congestion from so many extra airport operations, the carriers may choose to substitute a smaller number of larger planes, thereby slightly increasing fuel needs. This paper also provides a key ingredient for models of an international network where it is impossible to serve many long distance market pairs without consolidation.     

Intermodal hub-and-spoke network design: Incorporating multiple stakeholders and multi-type containers

This paper develops a mathematical program with equilibrium constraints (MPEC) model for the intermodal hub-and-spoke network design (IHSND) problem with multiple stakeholders and multi-type containers. The model incorporates a parametric variational inequality (VI) that formulates the user equilibrium (UE) behavior of intermodal operators in route choice for any given network design decision of the network planner. The model also uses a cost function that is capable of reflecting the transition from scale economies to scale diseconomies in distinct flow regimes for carriers or hub operators, and a disutility function integrating actual transportation charges and congestion impacts for intermodal operators. To solve the MPEC model, a hybrid genetic algorithm (HGA) embedded with a diagonalization method for solving the parametric VI is proposed. Finally, the comparative analysis of the HGA and an exhaustive enumeration algorithm indicates a good performance of the HGA in terms of computational time and solution quality. The HGA is also applied to solve a large-scale problem to show the applicability of the proposed model and algorithm.     

Quasi-landlord port financing in China: Features,practice and a contract theory analysis

Since the 1970s and 80s, landlord port has been the dominant port financing model in western large and medium-sized container ports. In China, many prospective port projects have also explored a landlord port financing model. However, some evidence suggests that landlord port financing in China is a variant of the international mainstream landlord port financing model. Based on an explanation of their unique features and practices, this paper analyzes the Chinese quasi-landlord port financing model from a contract theory perspective, in which it can be viewed as a double-level principal–agent relationship and two-layer profit distribution contract with three participants: the state-owned assets administration department, the port investment company and the operators. Furthermore, the results show that in the Chinese quasi-landlord port financing model, whether in the case of both joint venture and port land lease (fixed rent), or in the case of both joint venture and port land transfer, the optimal incentive scheme is the same as in the international landlord port financing model with profit sharing rent or mixed rent.     

Competition Between New Port Governance Models on the Iberian Peninsula

The aim of this article is to analyze the interaction between port devolution processes in Portugal and Spain in their common geographical environment, the Iberian Peninsula. Firstly a review is done of the different port devolution processes in the world which specifically analyses the transition of numerous public and centralized ports to the landlord model. Among the conclusions that we can highlight with respect to the Iberian port systems are the need for a reflection process before any change is made to the port governance model, and greater cooperation between the two countries to avoid any possible future port tariff price wars. The over-investment process that the Spanish port devolution process, especially, has generated must also be mentioned, for highlighting once again the almost inexhaustible ability of ports to eat up public funds for investment that precludes profitability.     

Health externalities of ship air pollution at port – Piraeus port case study

This paper is employing the well-known methodology of impact pathway approach to assess the external costs in human health from ship air pollution at port areas. The passenger port of Piraeus, Greece is the scenery of the study. Piraeus port is in the vicinity of the greater Athens metropolitan area where almost half of the country’s population lives. Hence, this port is the central hub of the Greek coastal passenger ship system which connects the islands of the Aegean Sea with land and is characterized by heavy ship traffic. The case study presented in this paper assesses the annual external cost in human health from air emissions produced by all passenger ships and cruise ships calling the port of Piraeus. Health cost from ships at port has been estimated at both local (Athens metropolitan area) and regional level (entire territory of Greece). Results show that higher costs occur at the local level. The dominant pollutants creating this cost are particulate matter (PM_2.5, and PM₁₀). Overall, the results indicate that the health impact of Piraeus’s passenger port emissions is not negligible; however the cost of PM₁₀ is considerably lower than the corresponded cost deriving from the land based industries of the Athens regional area for which comparison has been available.     

A decision support system for port selection

Abstract

A number of studies have been carried out on the factors determining port choice, derived from the perspectives of shippers, carriers or both. Recently, some studies using multi-criteria analysis, more specifically Saaty's analytical hierarchy process (AHP), have been undertaken to address port competitiveness and port selection by shipping lines. Based on a review of the literature on port selection, this article proposes a decision support system (DSS) for port selection using AHP methodology. The proposed DSS is web-based and thus it can be accessed by more decision makers and data collection can be carried out faster. Moreover, AHP addresses the issue of how to structure a complex decision problem, identify its criteria, measure the interaction among them and finally synthesise all the information to arrive at priorities, which depict preferences. AHP is able to assist port managers in obtaining a detailed understanding of the criteria and address the port selection problem utilising multi-criteria analysis. This article presents the architecture and the port selection procedure of the web-based DSS, and then illustrates three different cases. It shows how technology advancement can bring positive effects of strategic planning to shipping firms.     

The environmental cost implication of hub–hub versus hub by-pass flight networks

Increasing congestion at major hubs and the advantage to passengers of non-stop flights and faster journey times has intensified the debate on patterns of air service. At the same time the economics of highly focused networks has been challenged by the availability of very economic smaller capacity long-haul aircraft. The purpose of this research is to value the environmental costs of these two patterns of service: hub-to-hub and hub by-pass. Five long-haul markets were evaluated both on a hub to hub and hub by-pass basis. These involved both transatlantic and Europe/Asia flights. It was found that the noise and emissions social cost impact of the hub by-pass networks was significantly lower than the hub to hub in all cases. Differences in environmental costs per passenger depend on the concentration of population around the airports and the degree to which the hub routing involves extra mileage.     

An aggregate demand model for air passenger traffic in the hub-and-spoke network

In this paper, we build an aggregate demand model for air passenger traffic in a hub-and-spoke network. This model considers the roles of airline service variables such as service frequency, aircraft size, ticket price, flight distance, and number of spokes in the network. It also takes into account the influence of local passengers and social-economic and demographic conditions in the spoke and hub metropolitan areas. The hub airport capacity, which has a significant impact on service quality in the hub airport and in the whole hub-and-spoke network, is also taken into consideration.Our demand model reveals that airlines can attract more connecting passengers in a hub-and-spoke network by increasing service frequency than by increasing aircraft size in the same percentage. Our research confirms the importance of local service to connecting passengers, and finds that, interestingly, airlines’ services in the first flight leg are more important to attract passengers than those in the second flight segment. Based on data in this study, we also find that a 1% reduction of ticket price will bring about 0.9% more connecting passengers, and a 1% increase of airport acceptance rate can bring about 0.35% more connecting passengers in the network, with all else equal. These findings are helpful for airlines to understand the effects of changing their services, and also useful for us to quantify the benefits of hub airport expansion projects.At the end of this paper, we give an example as an application to demonstrate how the developed demand model could be used to valuate passengers’ direct benefit from airport capacity expansion.     

Hub location with flow economies of scale

A characteristic feature of hub and spoke networks is the bundling of flows on the interhub links. This agglomeration of flows leads to reduced travel costs across the interhub links. Current models of hub location do not adequately model the scale economies of flow that accrue due to the agglomeration of flows. This paper shows that current hub location models, by assuming flow-independent costs, not only miscalculate total network cost, but may also erroneously select optimal hub locations and allocations. The model presented in this paper more explicitly models the scale economies that are generated on the interhub links and in doing so provides a more reliable model representation of the reality of hub and spoke networks.