Airline energy efficiency measures using the Virtual Frontier Network RAM with weak disposability

In this paper, airline energy efficiency is divided into three stages: the operations stage, the services stage and the sales stage. Greenhouse gas emissions are treated as an undesirable output of the services stage. This new three-stage strategic operating framework is a modification of existing models. A new model, Virtual Frontier Network Range Adjusted Measure with weak disposability, is proposed to evaluate the efficiencies of 22 international airlines, from 2008 to 2012. The results show that the new model can establish more reasonable rankings and confirm new benchmarking airlines and that inclusion in the European Union’s Emissions Trading Scheme has had little influence on the improvement of airline energy efficiency.     

Airline energy efficiency measures considering carbon abatement: A new strategic framework

In this paper, airline energy efficiency is divided into two stages: Operations Stage and Carbon Abatement Stage. This new two-stage operating framework is a modification of existing ones. Then the model, Network SBM with weak disposability, is presented to evaluate the efficiency of 22 international airlines from 2008 to 2012. The results show that: (1) Most airlines’ energy efficiencies have not declined in the period. (2) The average efficiency of European airlines is higher than that of non-European airlines. (3) Non-European airlines have smaller advancements in efficiency score than European airlines. (4) Most airlines’ efficiencies in Operations Stage are higher than Carbon Abatement Stage.     

The inclusion of aviation into the EU emission trading scheme – Impacts on competition between European and non-European network airlines

In 2008, the European Commission, the European Parliament and the European Council agreed on including international aviation in the already existing European Union carbon market. From 2012, allowances will be required for all international flights landing at and departing from any airport in the EU. Domestic aviation will be subject to the same rules as international air traffic. Model-based empirical estimations presented in this paper indicate a diverse set of effects influencing competition between European and non-European aircraft operators. Initially, this paper provides an overview on recent political developments on EU as well as on International Civil Aviation Organisation level on the subject of emissions trading and aviation. Subsequently, our modelling approach and the main results concerning impacts on operating costs, ticket prices and cargo rates for European and non-European aircraft operators are presented and discussed. Finally, conclusions about the impacts on competition between European and non-European airlines are drawn.     

An empirical assessment of the CO2-sensitive productivity of European airlines from 2000 to 2010

Due to the ongoing increase in the number of commercial flights, greenhouse gas emissions from aviation are expected to rise significantly. Balancing the pursuit of productivity growth with environmental-footprint control policies comprises a long-term regulatory challenge. In this light, the main goals of the present paper are: (i) to measure the CO₂ emissions of European airlines from 2000 to 2010, (ii) to compute airlines’ productivity in developing an environmental-sensitive productivity index, (iii) to compare the obtained results with those resulting from a traditional index, and (iv) to identify the drivers affecting productivity changes. Our results show that on average, airlines’ relative CO₂ emissions have decreased. Although the airlines we studied experienced an average productivity increase—both considering and not considering negative externalities production—environmentally sensible productivity growth is lower than traditional productivity growth. Finally, we find that improvements in load factor as well as a combined increase in stage length and aircraft size affect productivity changes positively, while fuel efficiency is significant only in the case of a CO₂-sensitive measure of productivity.     

Have Emission Control Areas (ECAs) harmed port efficiency in Europe?

Ports in the European Union and North America have enforced environmental regulations on controlling SO_x and NOx emissions from ships in their coastal areas known as Emission Control Areas (ECAs). This study uses two-stage approaches to examine whether ECA regulations impact the efficiency of ports operating in such areas. First, port efficiencies are estimated using non-radial slacks-based measure (SBM) Data Envelopment Analysis (DEA) models. The efficiency scores estimated by the SBM DEA models are then regressed on explanatory variables, including the ECA factor, and macroeconomic indicators using bootstrapped truncated regression (BTR) models. Panel data is collected on countries in EU ECAs and non-ECAs regarding such input variables as capital and labor, with cargo as an output variable. The results indicate that ECA regulations can harm port efficiency, reflecting concerns of policy-makers and industrial managers: the average efficiency loss from an ECA designation amounts to 0.058–0.066 on a scale of 0–1, accounting for a 15–18% loss from ECA ports’ average efficiency scores.     

Operational efficiency versus financial mobility in the global airline industry: a data envelopment and Tobit analysis

The events of September 11th, 2001 precipitated an almost unprecedented financial crisis for the world airline industry. However, it is not clear that these events represent a discrete, industry disruption or whether, in fact, airlines were already entering a period of economic challenges that would demand new strategic orientations on their part. This study investigates the structural drivers of operational efficiency as well as the financial posture of airlines on the eve of September 11th.A sample of 38 airlines from North America, Europe, Asia and the Middle East was utilized to investigate whether relative operational efficiency implied superior financial mobility (as defined by Donaldson). Data envelopment analysis was utilized to derive efficiency scores for individual airlines. The underlying structural drivers of efficiency were then investigated. It was found that the traditional framework developed in the literature still provided reasonable explanatory power for realized relative operational efficiency. However, the second stage of the analysis found that relative operational efficiency did not inherently imply superior financial mobility. As such, airlines that had chosen relatively efficient operational strategies found themselves in positions of vulnerability with regard to financial mobility and thus suffered the consequences in the post-September 11th environment.     

Is it the labor unions’ fault? Dissecting the causes of the impaired technical efficiencies of the legacy carriers in the United States

Data envelopment analysis is used to evaluate the technical efficiencies of a number of major passenger airlines in the United States at transforming their inputs (labor, fuel and fleet-wide seating capacity) into available seat-miles. A tobit regression model is then used to identify the underlying drivers of airline efficiency, as measured by the data envelopment analysis efficiency score. The impact of unionization on airline efficiency is found to be statistically insignificant, controlling for the influences of other hypothesized determinants of airline efficiency: the average age of an airline’s fleet, the average size of its aircraft, its average stage length, the extent to which the airline relies of hubbing within its route structure, the percent of its passenger enplanements that are international, and whether the airline is a legacy carrier. The statistically significant drivers of airline efficiency, at a ten percent level of significance, are average aircraft size, average stage length and the extent to which the airline relies on hubbing and connecting flights within its route structure. The stage length variable is not significant at a five percent level of significance, however. An increase in average aircraft size or in average stage length enhances an airline’s efficiency whereas an increase in hubbing reduces it.     

Dealing with the efficient allocation of scarce resources at congested airports

The existing slot allocation mechanism, based on the International Air Transport Association (IATA) system and its complementary version of the European Union (EU) regulation, produces rather poor capacity allocation outcomes for congested EU airports since it fails to properly match slots requested with slots allocated to airlines. Inefficiencies during the initial allocation are mainly due to the problem complexity in conjunction to limited decision support available to slot coordinators. On the other hand, substantial inefficiencies give rise to severe slot misuse and unreasonably low utilisation of airport resources running already into scarcity. The objective of this paper is to develop an optimisation-based model implementing the existing EU/IATA rules, operational constraints, and coordination procedures with the ultimate objective to better accommodate airlines’ preferences at coordinated airports through the minimisation of the difference between the requested and the allocated slot times to airlines. The results of the model are assessed and compared vis-à-vis the allocation outcome produced according to current slot coordination practice in three regional Greek airports. The proposed model produces very promising results and demonstrates that there is large room for improvement of the efficiency of the current allocation outcome in a range between 14% and 95%. The discussion of the model results is complemented by a sensitivity analysis highlighting the importance of declared capacity and the magnitude of its influence on slot allocation efficiency.     

Evaluating airlines with slack‐based measures and meta‐frontiers

This study develops a new performance evaluation model, called the meta dynamic network slack‐based measure (MDN‐SBM). This model incorporates the concept of meta‐frontiers to facilitate comparisons of performance of decision making units, while at the same time it generalizes the slack‐based measure (SBM), network SBM, and dynamic SBM. This MDN‐SBM model is capable of dealing with two important special features of the transportation industry: unfavorable accidents and non‐storable goods, i.e. available seat‐kilometers that are wasting assets that lose value completely if unsold before departure. Hence, this generalized model contains higher differentiable capability than all its SBM‐related submodels in the literature. To demonstrate, 35 international airlines with two divisions (production and consumption) in three terms (one‐year time periods from 2007 to 2009) have been analyzed using meta‐performance efficiency measures (ME) for all decision making units and have also been compared by geographical area (Asia‐Pacific, N. America/Europe). The numerical example and comparison validate the proposed MDN‐SBM model and suggest the airlines should put more focus on input resources reduction for productivity improvement. Copyright © 2016 John Wiley & Sons, Ltd.     

Using Bus Rapid Transit to Mitigate Emissions of CO2 from Transport

Abstract

This article investigates the role of bus rapid transit as a tool for mitigation of transport‐related carbon dioxide (CO₂) emissions. We analyse a Quality Bus Corridor (QBC) implemented in Dublin, Ireland, in 1999 and estimate CO₂ emissions associated with differing levels of bus priority for the period 1998–2003 and for the Kyoto commitment period (2008–12). Associated monetary values are established using CO₂ prices from the European Union Emissions Trading Scheme. We find that, in the absence of a QBC, peak‐time emissions for our sample population would have been 50% higher than in the factual scenario. For the Kyoto commitment period, we find the median value of the policy implementation to be in the region of [euro]650 000.     

Measuring production and consumption efficiencies using the slack‐based measure network data envelopment analysis approach: the case of low‐cost carriers

One of the most important outcomes of the deregulation of air transportation policy is the emergence of low‐cost carriers (LCCs) around the world. Although LCC airlines have been in operation for more than 30 years, not every LCC is successful. In order to reduce the inefficiencies of LCCs, this paper measures the performance of LCCs by using slack‐based measure network data envelopment analysis. This model combines both the production process with input orientation and the consumption process with output orientation into a unified model. Furthermore, envelopment map analysis LCCs are performed to determine the reasons for the LCCs' inefficiency and how improvements can be made. A sample of 16 low‐cost airlines from Europe, the USA, and Asia were selected for operational performance analysis. The results show that the main reason for easyJet's, US Airways', and Virgin Blue's inefficiency is production inefficiency, so these LCCs should reduce their input quantities to increase efficiency. Jet2, Aer Lingus, and JetBlue were, by contrast, found to be consumption inefficient; these LCCs should increase their output quantities in order to enhance performance. Copyright © 2012 John Wiley & Sons, Ltd.     

Deregulating European aviation — A case study

European international scheduled aviation has been characterised by bans on market entry, price collusion, and capacity sharing. High fares were charged compared to world standards and the fares charged by European charter airlines.In May 1986 new entrants with pricing freedom were permitted on the London-Dublin route which was then the third largest in European scheduled international aviation. Prior to deregulation the route experienced high fare growth. The unrestricted fare ex-London increased 72.6 per cent compared to a Retail Price Index increase of 41.5 per cent. There was a growth in passenger numbers in the years 1980–85 of 2.8 per cent.Since deregulation passenger numbers have risen to 2.3 million compared to 994,000 before deregulation. Fares have declined by an estimated 37 per cent ex-Dublin and 42 per cent ex-London in real terms. There have been four cases of market entry and one of market exit. The estimated share of the new entrants in the second half of 1989 was 28 per cent. The preregulation earnings data of Aer Lingus, the market leader, indicated that protection allowed staff to earn economic rents. A two-tier structure was introduced in response to competition.Remaining barriers to contestability in UK/Ireland aviation include hub airport dominance, ground handling monopolies, and the ability of airlines with routes in both regulated and deregulated markets to engage in geographical price discrimination against airlines with routes in deregulated markets only. A pro-contestability aviation policy in Europe will require measures to prevent the abuse of dominant positions by established airlines over new market entrants and to prevent collusion between established airlines.     

Airline Jet Fuel Hedging: Theory and Practice

Abstract

Most international airlines hedge fuel costs, but the theoretical justification behind this action is weak. The paper explores the nature and extent of airline fuel hedging and asks why airlines hedge. The availability of hedging instruments is first discussed, with the most liquid markets in crude and exchange traded contracts. Aviation fuel contracts are possible, but with counter‐party risk. Most major passenger airlines with sufficient cash and credit now hedge at least part of their future needs. Hedging does protect profits against a sudden upturn in crude prices caused by political and consumer uncertainty leading to slower economic growth. However, if higher oil prices are induced by strong economic growth and oil supply constraints, hedging increases volatility with hedging gains reinforcing improved profits from higher traffic and improved yields. If hedging does not reduce volatility, it may still have an accounting role in moving profits from one time period to another, insure against bankruptcy, and signal the competence of management to investors and other stakeholders.     

The evaluation of transportation energy efficiency: An application of three-stage virtual frontier DEA

In this paper, transportation energy efficiency is newly defined and its inputs and outputs are obtained through literature review. Labor input, capital input and energy input are selected as the inputs, passenger turnover volume and freight turnover volume are defined as the outputs. A new model—three-stage virtual frontier DEA (three-stage virtual frontier Data Envelopment Analysis) is proposed to evaluate transportation energy efficiencies. The case of thirty Chinese PARs (provincial administrative regions) from 2003 to 2012 is applied to verify its rationality. In the three-stage virtual frontier DEA, the reference DMU (decision-making unit) set and the evaluated DMU set are two different sets so that it can distinguish the DEA efficient DMUs. And in the evaluating process, the reference DMU set remains unchanged to assure its results more reasonable than Super DEA model. The results show that transport structure and management measures have important impacts on transportation energy efficiency.     

The impact of strategic management and fleet planning on airline efficiency - A random effects Tobit model based on DEA efficiency scores

As a result of the liberalisation of airline markets; the strong growth of low cost carriers; the high volatility in fuel prices; and the recent global financial crisis, the cost pressure that airlines face is very substantial. In order to survive in these very competitive environments, information on what factors impact on costs and efficiency of airlines is crucial in guiding strategic change. To evaluate key determinants of 58 passenger airlines’ efficiency, this paper applies a two-stage Data Envelopment Analysis (DEA) approach, with partially bootstrapped random effects Tobit regressions in the second stage. Our results suggest that the effects of route optimisation, in the sense of average stage length of the fleet, are limited to airline technical efficiency. We show that airline size and key fleet mix characteristics, such as aircraft size and number of different aircraft families in the fleet, are more relevant to successful cost management of airlines since they have significant impacts on all three types of airline efficiency: technical, allocative and, ultimately, cost efficiency. Our results also show that despite the fuel saving benefits of younger aircraft, the age of an airline’s fleet has no significant impact on its technical efficiency, but does have a positive impact on its allocative and cost efficiency.     

The effect of code-share agreements on the temporal profile of airline fares

This paper aims at investigating how the pricing strategy of European airlines is affected by code-share agreements on international routes. Our data cover several routes linking the main UK airports to many European destinations and includes posted fares collected at different days before departure. By analyzing the temporal profile of airline fares, we identify three main results. First, code-share increases fares especially for early bookers. Second, the higher prices in code-shared flights are offered by marketing carriers. Finally, in single operator code-shared flights (unilateral code-share), the pricing profile is flatter than under parallel code-share.     

Assessment of carbon emission costs for air cargo transportation

This study presents a set of models that calculate carbon emissions in individual phases of flight during air cargo transportation, investigates resultant carbon footprints by aircraft type and flight route, and estimates increases in transportation costs for airlines due to carbon taxes imposed by the EU ETS. The estimated results provide useful references for airlines in aircraft assignment on different routes and in aircraft selection for new purchases. Validation of the model is conducted by simulating the potential impact of the implementation of the EU ETS on costs of air cargo transportation for six routes and six types of aircraft. Results show that the impact may be subject to various factors including unit carbon emissions per aircraft, aviation emission allowances per airline, and carbon trading prices; and that increases in costs of air cargo transportation range from 0% to 5.27% per aircraft per route. Therefore, the implementation of the EU ETS may encourage airlines to cut down their operating costs by reducing their carbon emissions, thereby ameliorating greenhouse gas pollution caused by air cargo transportation.     

The influence of the operational environment on efficiency of international airports

Heterogeneity must be considered in the efficiency analysis of decision‐making units; otherwise, the results will be strongly biased. This is also valid for airport management where the operational environment heavily influences efficiency. In this paper, conditional efficiency measures are applied to airports to incorporate heterogeneity in non‐parametric frontier models which are robust for outlying observations. In particular, the influence of the operational environment on airport efficiency is examined in a sample of 141 international airports. The conclusions show that the operational environment indeed matters and that privatisation, regulation, traffic transfer and the dominant carrier have a positive effect on efficiency, whereas aeronautical revenues influence it negatively. Copyright © 2014 John Wiley & Sons, Ltd.     

Sailing into a dilemma: An economic and legal analysis of an EU trading scheme for maritime emissions

On the basis of a joint economic and legal analysis, we evaluate the effects of a “regional” (European) emission trading scheme aiming at reducing emissions of international shipping. The focus lies on the question which share of emissions from maritime transport activities to and from the EU can and should be included in such a system. Our findings suggest that the attempt to implement an EU maritime ETS runs into a dilemma. It is not possible to design a system that achieves emission reductions in a cost efficient manner and is compatible with international law.     

Forecasting Freight Flows

Trade patterns and transport markets are changing as a result of the growth and globalization of international trade, and forecasting future freight flow has to rely on trade forecasts. Forecasting freight flows is critical for matching infrastructure supply to demand and for assessing investment. This article models long-term dynamic physical trade flows and estimates a dynamic panel data model for foreign trade for the EU15 and two countries from the EFTA (European Free Trade Association) 1967–2002. The analysis suggests that a dynamic three-way-effects gravity equation is the best-fitted econometric model. The analysis uses a structural relationship to explain the structure of the exchange of the goods—a relationship that can be used in the year of forecast. This article also provides a new methodology for converting monetary aggregates into quantity aggregates. The resulting commodity growth rates constitute a valuable input to freight models for forecasting future capacity problems.