Institutional structure of New Zealand licensed road freight carriers

Road freight transport in New Zealand has operated under government regulations since 1936, primarily to protect the freight revenue of the New Zealand Railways. In 1983 an Act was passed to deregulate the freight transport industry and to switch over to a qualitative licensing system. This is expected to have some impact on competition within the road freight industry as well as between road and rail. This paper analyses the institutional structure of the road freight industry at the pre‐deregulation phase. The trend over the last few years, shows that the number of single vehicle owners (mostly owner‐drivers) and their share in the industry is growing at a faster rate than others. The vehicle authority distribution varies widely from one region to another in the country. Economic factors like employment, population, urbanization etc. could not explain this variation. The segregation of demand by existing government regulations appears to be the main reason for such diversity in vehicle authority distribution. Apparently there is no monopoly trend in the aggregate nor in the regional distribution. However, many owner drivers work closely with large firms, which may change the concentration observed in the distribution of vehicle authorities.

Productivity is relatively high for one person operations, i.e., mainly owner drivers. It then goes down and then rises to a certain limit. This gives an indication of the possibility of economies of scale, the single vehicle firms being an exception.     

Transport deregulation and the economy wide implications of the wheeler‐Gilmour hypothesis

This paper focuses on the effects of deregulation of motor carriers in Australia. It is particularly concerned with the implications of regulatory reform beyond the transport sector and uses a general equilibrium approach to examine the economy wide effects of deregulation. Among other things the paper shows that the effects of deregulation are not evenly distributed across all types of industries. Furthermore it concludes that the magnitude of the effects from deregulation in any given industry is not necessarily correlated with the share of total costs devoted to the purchase of transportation services.

     

Price and frequency competition in freight transportation

This paper develops a simple analytical model of price and frequency competition among freight carriers. In the model, the full price faced by a shipper (a goods producer) includes the actual shipping price plus an inventory holding cost, which is inversely proportional to the frequency of shipments offered by the freight carrier. Taking brand loyalty on the part of shippers into account, competing freight carriers maximize profit by setting prices, frequencies and vehicle carrying capacities. Assuming tractable functional forms, long- and short-run comparative-static results are derived to show how the choice variables are affected by the model’s parameters. The paper also provides an efficiency analysis, comparing the equilibrium to the social optimum, and it attempts to explain the phenomenon of excess capacity in the freight industry.     

Holding decisions for correlated vehicle arrivals at intermodal freight transfer terminals

We propose a vehicle holding method for mitigating the effect of service disruptions on coordinated intermodal freight operations. We extend existing studies mainly by (1) modeling correlations among vehicle arrivals and (2) considering decision risks with a mean-standard deviation optimization model. We prove that the expected value of the total cost in our proposed formulation is not affected by the correlations, while the variance can be miscomputed when arrival correlations are neglected. We also identify some implications of delay propagation when optimizing vehicle holding decisions in real-time. We provide general criteria for determining the boundary of the affected region and length of the numerical search, based on the frequency of information updates. Theoretical analyses are supported by three numerical examples.     

Deregulation in Polish Rail Transport

Abstract

A phenomenon new to the Polish situation—the deregulation of rail transport—is presented. Despite its primarily legal nature, deregulation also implies various economic, socio‐political and spatial consequences. The relatively short period over which partial deregulation of public transport in Poland has been in effect (i.e. since 2000) ensures that the issue has not been taken up by Polish geographers as a research field. However, it has been of interest to Polish economists. Deregulation is a phenomenon of primary importance, with direct implications for the character, quality, type, intensity and spatial differentiation of transport (including freight and passenger traffic) within the market economy. This paper, therefore, presents the impact of the recent changes in the legal system (as regards deregulation) on the current pattern of railway connections of the major carriers. As the majority of these originate beyond the Polskie Koleje Państwowe (Polish State Railways) Group, they can be said to be independent of the main former state carrier.     

Three-player game-theoretic model over a freight transportation network

With recent development in freight transportation industry, its network structure has become more complicated, as many decision-makers competing for profits with each other are involved. While most recent research in this area is focused on the perfectly competitive market and the prices are given as a constant tariff rate, little attention has been paid to the system optimization problem in the absence of regulatory authority. In this paper, we investigate the competitive equilibrium in an oligopolistic market on a freight network. A partially non-cooperative game among shippers, carriers and infrastructure companies (IC) is examined. All three kinds of players act as profit maximizing agents, except that the carriers and ICs are assumed to behave cooperatively in their own coalitions. We consider the vertically efficient nonlinear tariff schedules which are commonly used in the transportation industry. By introducing a three-stage game-theoretic model, we show that the equilibrium flows can also maximize total system profits if the IC and the carrier both use vertically efficient nonlinear pricing schedules. The division of the surplus associated with each shipment is obtained by solving a linear programming problem. We provide a few examples under different situations to show the existence of the resulting equilibrium.     

Motor carrier strategies and performance

This paper examines post-deregulation strategies of less-than-truckload general freight carriers. Data on 38 strategic variables were gathered from annual reports filed with the Interstate Commerce Commission. Cluster analysis was used to categorize the one-hundred and forty firms into four strategic groups identified as follows: (1) differentiation approach coupled with a risky financial strategy; (2) a well-defined focus strategy concentrating on select types of traffic among select shipper groups; (3) a particularly sedentary strategy showing little activity across dimensions; and (4) an aggressive expansion strategy characterized by high growth rates. Major findings are: (1) a well-formulated and clearly defined strategy is an important determinant of financial performance and (2) despite the intense competition brought about by deregulation, an appropriate choice of strategy can provide financial performance comparable to “average” firms in the regulated environment.     

Models for rail transportation

Railroads constitute an important mode of transport for both freight and passengers. In the United States, for example, railroads are responsible for 35.6% of total intercity freight transport and enjoy approximately 30% of total revenues of all carriers. However; due to severe competition from other modes, the rail industry is eager to improve its operational efficiency and rationalize its planning decisions further. The role of analytical models in supporting managerial decision-making thus assumes renewed importance. This reports on the existing literature models for rail transportation with two goals in mind: (a) to collect and categorize rail modelling efforts, and (b) to position the rail-related literature in the context of other transportation models and provide an introduction to this field for nonspecialists. Optimization, queueing, and simulation models are all treated with particular emphasis on optimization. The role of each class of models is discussed in relation to its function and its position within the total planning activity of a railroad. A concluding section outlines the major modelling obstacles and promising areas for future development.     

Impacts of combining partial and general equilibrium modelling in freight transport analyses – a forest sector case study from Norway

Abstract

The forest sector in Norway is very transport intensive, accounting for approximately 14% of total domestic freight transport traffic on Norwegian roads. This paper presents an analysis linking a general equilibrium freight transport modelling tool with a partial equilibrium model of the forest sector. The freight transport model predicts transport costs, modal split and transport patterns, and the results are treated as inputs to the forest sector model. The objective of the paper is to analyse the modelling effect of taking forest sector model effects back into the freight transport model and treated as new demand. Compared to a base scenario for the year 2020, we compare analyses with and without this new demand from the forest sector model back into the freight transport modelling tool.     

The development of urban bus regulatory policy in Korea reviewed

The urban bus industry in Korea used to be controlled to provide stable transport services and enable operators to secure proper profits, but there were adverse effects within the industry such as inadequate business management and a downward spiral of low quality services resulting from lower fares. The government began easing restrictions on entry, operation, fares, and some conditions and procedures for licensing in the late 1980s, until in 1993, the government published a package of deregulatory measures that were considerably more drastic than those previously seen, such as freely adjusting the number of vehicles within 10%, easing the restrictions and requirements for operators’ employing staff and drivers, and improving the fare system. However, these measures seem to have been introduced too late and too luke‐warmly to encourage new entrants to the industry. Therefore, to gain the desirable effects of deregulation and to secure the development of the urban bus sector, there needs to be provision of a market atmosphere and greater scope for free competition; a positive attitude among operators for efficient business management and new services; and alert observation and monitoring by passengers.     

Airline industry deregulation and changes in systematic risk

Deregulation of U.S. Airline Industry may have lowered systematic risk because pricing freedom and route flexibility improved airline management reaction to various economic conditions. Reduced systematic risk offers lower cost of equity capital for the industry as a whole as well as for individual carriers. Previous research has had mixed results in identifying a relationship between deregulation and airline industry cost of capital. This study plots airline industry Beta coefficients across the years 1963 to 1987 and clears up previously conflicting research findings. Beta coefficients had been falling since the fuel crisis of 1974 and continued to fall through 1980. Fluctuations since deregulation have been relatively minor and systematic risk has leveled off at a significantly lower value than before deregulation. Studies which concentrate on the fluctuation in Beta since 1978 are dependent on the exact time period of analysis, and their conclusions that deregulation raised or lowered systematic risk are likewise suspect. A broader view of systematic risk changes in the deregulatory era shows airline Betas peaking from 1971 to 1973 and a gradual decrease as deregulation was being discussed, implemented, and legally mandated. This gradual decline from 1974 to 1980 may be attributed to such factors as fuel prices, interest rates, general inflation as well as deregulation. In any case systematic risk of the U.S. Airline industry has been lower since deregulation than in decades before.     

Competition policy and the liberalisation of European aviation

The European aviation industry is undergoing a process of liberalisation. One of the important lessons of American deregulation was that the industry is not perfectly contestable. One implication of this is that actual competition on a route is important in order to be able to secure the benefits of deregulation or liberalisation. Another is that effective competition policy is important in order to prevent anti-competitive mergers or predatory behaviour. This paper reviews the merger investigations in European aviation which have accompanied the search by carriers to secure the benefits of market power, and considers the extent of route competition within the European Community and its relationship to the different route licensing policies of different national governments. The paper considers the extent of present competition on the busiest routes, and stresses the importance of cabotage rights in opening up the European market to effective competition.     

Evaluation of the policies in British local transport plans with regard to the promotion of rail freight

Over the last couple of decades there has been a trend in Western Europe and North America towards making the railway industry more able to compete successfully with road for freight haulage through deregulation and/or structural change. This trend has been drive, partly, by a concern to produce more commercially viable railway industries, but also by concerns to reduce the environmental impacts of road haulage through modal shift. The latter in particular has led to the development of public policies supportive of rail freight, particularly at the national or international levels. This paper reports on qualitative research that analysed public policy aimed at promoting rail freight in Britain but, unusually, the focus was on local rather than national policy. The research was an investigation of the approach of local authorities to the encouragement of rail freight as evidenced through their Local Transport Plans. The paper concludes that in Britain there has been a significant amount of local policymaking for rail freight and that although national policy matters are of overriding importance, the role of local policy is significant and can be developed further.     

Decoupling of Road Freight Transport and Economic Growth Trends in the UK: An Exploratory Analysis

Abstract

Between 1997 and 2004, gross domestic product increased in real terms in the UK by one‐fifth, while the volume of road freight movement remained stable. This suggests that the long‐awaited decoupling of economic and freight transport growth has begun, possibly leading to a new era of sustainable logistics. This paper reviews previous research on the decoupling issue and recent trends in gross domestic product/freight tonne‐km elasticities in Europe and the USA. It then examines 12 possible causes of the observed decoupling in the UK using published statistics from a wide range of British and European sources. This analysis indicates that around two‐thirds of the decoupling is due to three factors whose impact can be quantified: the increased penetration of the British road haulage market by foreign operators, a decline in road transport’s share of the freight market, and real increases in road freight rates. Several other factors, most notably the relative growth of the service sector, the diminishing rate of centralization, and the off‐shoring of manufacturing, appear to be having a significant effect, though this finding cannot be measured on the basis of available statistics. The paper concludes that, while the decoupling is in the right direction from a public policy standpoint, the net environmental benefits are likely to be quite modest.     

A canonical correlation analysis of carrier financial strategy: The case of airline deregulation

This study investigates U.S. airline managements' perception of deregulation's impact upon the industry's financial risk by analyzing the airlines' risk management behavior. Specifically, canonical correlation analysis is utilized to ascertain key asset-liability/equity interrelationships and to identify changes in airline risk management as indicated by changes in financial structure. A control sample of nonregulated firms in various service industries is used to separate the effects of general economic conditions from those of deregulation. The results indicate that the airline industry adjusted its financial structure to reduce the industry's exposure to risk as the industry became deregulated. The industry decreased its financial leverage through greater use of equity vis-à-vis debt to finance its long-term assets while simultaneously increasing its liquidity. Definitive conclusions concerning the industry's perception of financial risk after deregulation had been in place a few years are precluded by two external events which occurred in 1978—the requirement that leases be capitalized on the balance sheet and the rapid fuel price increases spurred by the Iran-Iraq war. However, the results clearly show the industry perceived greater financial risk during the early years of de facto CAB deregulation.     

Framing the Nexus of Globalisation,Logistics and Manufacturing in Europe

Abstract

Under the ongoing influence of globalisation, supply chains have changed significantly. New logistics and manufacturing systems have emerged, causing longer transport distances and increasing transport emissions. The existing research into the sustainability impacts of freight transport has largely viewed it as being a macro-level economic and political phenomenon and has ignored the interdependencies amongst micro-level economic actors, including firms and businesses in the private sector. In this paper, we presume that the lack of conceptualisation of freight transport in relation to wider institutional contexts and firm behaviour results in the lack of a holistic approach to understanding freight governance in the face of globalisation. We argue for the use of institutional economic geography lenses to elucidate the distribution networks of emerging logistics and manufacturing practices and its implications for freight transport. We illustrate our argument through a broad look at the European logistics and manufacturing practices and global production.     

Freight transportation demand: A survey of recent econometric studies

This paper surveys econometric studies of freight transportation demand which have been published since the mid-1970s. It describes the variables, data sources, and estimation procedures utilized by the studies. In addition, it summarizes their statistical results. The studies included in this survey typically accounted for freight rates and service characteristics (e.g., transit time and reliability). Data sources often varied across the studies.Based on the data they utilized, the surveyed studies are classified as either aggregate or disaggregate. The data in the aggregate studies consist of information on total flows by modes at the regional or national level, while the data in the disaggregate studies pertain to individual shipments. The earlier aggregate studies estimated linear logit models. It has been pointed out that when they are estimated on aggregate data these models are subject to certain shortcomings. To avoid these shortcomings, more recent aggregate studies have estimated flexible forms such as translog functions. The disaggregate studies surveyed in this paper used either logit or probit models.Statistical results often varied with the commodities analyzed, making it somewhat difficult to generalize the findings of the different studies. One finding common to several studies is that freight rates have a significant impact on shipment decisions. This paper discusses certain theoretical and empirical limitations of the surveyed studies. It also offers suggestions for future research in freight transport demand. Freight demand models can be used to examine various effects of the recent deregulation in freight transportation.     

Competition and deregulation: Do air passengers get the benefits?

It is well established that increased airline competition can produce benefits to passengers, and it is generally assumed that airport deregulation, as part of the same process of liberalisation, will produce similar benefits. But this paper shows that this may not be the case. The potential benefits to passengers from increased airline competition will in general be partially absorbed by increased airport charges at unregulated airports, and in some circumstances this may even result in increases in overall charges, not reductions. This problem is sometimes tackled by putting regulated price caps on aeronautical services, but if these are not extended to the complementary commercial services (such as retailing) which airports also provide then the adverse effects may still occur. Similarly, unilateral deregulation leading to increased airport competition in one country may just lead to the majority of the gains going abroad. Overall, the conclusion is that claims of big passenger gains from deregulation and competition may be exaggerated, and achieving these gains in reality may need subtle and quite far-reaching government intervention.     

Air carrier activity at major hub airports and changing interline practices in the United States' airline industry

This paper presents data on air carrier activity at major hub airports and documents changing interline practices among carriers. Both developments have implications for understanding the evolving structure of the airline industry, as well as the nature of competition in the industry.     

Evaluation of Rail Freight Facilities Grant Funding in Britain

Abstract

Rail freight has been generally in decline in many European Union countries in recent years, contrary to European transport policy. State support for railway operations is commonplace in most countries, and this paper establishes the background to targeted rail freight grant funding in Britain. Through desk‐based analysis of Freight Facilities Grant (FFG) awards, together with a survey of recipient companies, the paper assesses the extent to which the planned flows expected from these awards have materialized and it evaluates the role of the grants in influencing rail freight volumes. The evidence suggests that FFG funding has been largely successful, attracting considerable private sector investment. Overall, FFGs have played an important role in developing or retaining rail freight flows, although the processes could be made more transparent and consistent. As other European countries liberalize their rail freight markets as a result of European Union legislation, such targeted funding may be an appropriate alternative to more general government subsidy of freight operations.