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.     

Low cost carrier competition and route entry in an emerging but regulated aviation market – The case of China

Although China lags behind other liberalized aviation markets in low cost carrier (LCC) development, its largest LCC, Spring Airlines, has achieved rapid growth in traffic volume and revenue, as well as consistent profitability, since its inauguration in 2005. Our empirical study on the Chinese domestic market suggests that Spring adopts a “cream skimming” strategy to enter high-priced routes, allowing the carrier to achieve both a very high load factor and considerable profitability. Spring’s capacity and market share on individual routes are constrained to low levels, likely due to government regulation and/or a “puppy dog” strategy adopted by the carrier. As a result, Spring is able to achieve fast growth without triggering price wars. To incumbent full service carriers, high speed rail (HSR) services impose much more significant competitive pressure than low cost carriers. Similar to LCCs in developed markets, Spring prefers to serve markets with high traffic volumes out of its operational base in Shanghai. Overall, Spring’s entry decision is not significantly affected by competition, either from full service airlines or HSR services. Our investigation suggests that LCCs have potential to introduce more competition but are yet to be a “game changer” in China. Further deregulation of the domestic market is needed.     

Serving vs. settling: What drives the establishment of low-cost carriers’ foreign bases?

This paper uses a probit model on a cross-sectional dataset of 202 airports and 29 airlines to assess the drivers for the establishment of foreign bases by European low-cost carriers (LCCs). We find that managerial, organizational, and environmental factors impact on foreign base establishment. In particular, there is evidence that the presence of a growth-oriented firm leader and the strategic importance of an airport for an airline significantly increase the probability of the presence of bases, while national unit labor costs, the volatility of flight operations and the membership of an LCC in an airline group significantly decrease this probability.     

Performance assessment of transport services with the ERM-NDEA model: evidence from a domestic airline in Taiwan

Abstract

This paper estimates comprehensive operational performance measures for transport services. A network efficiency approach is used to analyze the production efficiency, service efficiency, and operational efficiency in a unified framework to reflect the transportation service characteristics of airline operations. We show how a modified version of the network data envelopment analysis model can be utilized for evaluating the performance of air route operations. This study considers 15 air routes operated by a domestic airline in Taiwan to highlight the value of the approach. The results of the analysis show the inputs and consumed outputs leading to production inefficiency and service inefficiency respectively as well as the magnitudes of excesses and shortfalls.     

Contract Design,Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model

Abstract

US airports negotiate legally binding contracts with airlines and finance large investment projects with revenue bonds. Applying insights from transaction cost economics, we argue that the observed variation in contractual and financing arrangements at US airports corresponds to the parties' needs for safeguarding and coordination. The case evidence presented reveals that public owners set the framework for private investments and contracting. We suggest that airline contracts and capital market control result in comparative efficient investments and act as a check on the cost inefficiency typically linked to public ownership.     

An applicatoin of an optimal traffic control during lane closure periods of a two‐lane road

On two‐lane roadways, when provision should be made for alternative one‐way movement (for construction or maintenance), the traffic characteristics differ from normal operation in which no lane is closed. The purpose of this study is to derive optimal strategies for controlling, by means of traffic signals, the one lane operation (in two‐way roadways). In this study, strategies to determine the optimal length of the closed one‐lane section during construction and maintenance work are established. This length minimizes the objective function representing the tradeoff between delay cost and operational cost. Using the length value obtained by the proposed model, plus a timing methodology, the overall cost of operating the closed highway section can be minimized. The sensitivity analysis of the optimal solution for the section length is examined with respect to the input variables. This analysis shows that for very low traffic flow values (less than 100 vph per direction), the solution is very sensitive to fuel price changes, while for greater flow values, the solution is insensitive to this change. Similar results are obtained for changes in the worker's wage which is part of both the operational and the delay cost. That is, the section's length is sensitive to wage changes at low traffic flow and insensitive otherwise. Based on the results presented in this study, it is possible to establish a guideline for the section's length determination. The control measure can emerge from a pair of traffic signals that can be installed at both ends of the closed highway segment. This traffic control system is also described in the study in terms of its components and operational features and advantages.     

Measuring the energy efficiency for airlines under the pressure of being included into the EU ETS

In 2008, European Union (EU) announced that from 2012, each international flight taking off and landing in EU would be given an emission permit. Therefore, the period of 2008–2012 can be regarded as a buffer period for global airlines. Although EU formally decides to exclude non‐EU airlines from the EU Emission Trading System on March 4, 2014, it is necessary to investigate the impacts of the policy on airline energy efficiency in this period. Airline energy efficiency is divided into three stages—operations stage, service stage, and sales stage—and Greenhouse gas emission is treated as an undesirable output of service stage. Two models, network range‐adjusted measure model with weak disposability and network range‐adjusted measure model with strong disposability, are established to evaluate the efficiencies of 22 international airlines from 2008 to 2012. The results show that (i) most airlines' efficiencies have decreased in the period, and the EU Emission Trading System is not effective for the efficiency improvement; (ii) the average efficiency of European airlines is almost the same as that of non‐European airlines; and (iii) the model with weak disposability is more reasonable in distinguishing efficiency differences, while strong disposability is a more reasonable way in treating undesirable outputs. Copyright © 2016 John Wiley & Sons, Ltd.     

Measuring the Cost Effectiveness of Multimode Bus Transit in the Presence of Accident Risks

Abstract

This study employs the directional graph distance function and the multiactivity data envelopment analysis (DEA) approach, which incorporates both desirable and undesirable outputs, in order to provide a more complete representation of the multimode bus production technology from which environmentally and risk-sensitive cost effectiveness measures can be generated. We treat accident cost as the risky output in the sense that we wish to increase desirable outputs and decrease risky output and inputs. The approach is applied to the problem of measuring the cost effectiveness of 24 bus companies in Taiwan. An empirical illustration suggests that the overall cost effectiveness rankings turn out to be very sensitive to whether or not the graph multiactivity DEA approach is adopted. This implies that the conventional DEA cost effectiveness measure may be seriously misleading if it ignores the cost effectiveness of organizations that carry out various activities whilst sharing common resources.     

Optimal design of a short‐turning strategy considering seat availability

We develop a methodology to optimize the schedule coordination of a full‐stop service pattern and a short‐turning service pattern on a bus route. To capture the influence of bus crowding and seat availability on passengers' riding experience, we develop a Markov model to describe the seat‐searching process of a passenger and an approach to estimate the transition probabilities of the Markov model. An optimization model that incorporates the Markov model is proposed to design the short‐turning strategy. The proposed model minimizes the total cost, which includes operational cost, passengers' waiting time cost and passengers' in‐vehicle travel time cost. Algorithm is developed to produce optimal values of the decision variables. The proposed methodology is evaluated in a case study. Compared with methodologies that ignore the effect of bus crowding, the proposed methodology could better balance bus load along the route and between two service patterns, provide passengers with better riding experience and reduce the total cost. In addition, it is shown that the optimal design of the short‐turning strategy is sensitive to seat capacity. Copyright © 2016 John Wiley & Sons, Ltd.     

Queue length estimation at metered freeway‐to‐freeway connectors

Freeway‐to‐freeway connector metering is a cost‐effective and proven freeway management strategy for relieving recurrent congestion. However, one of the critical challenges in design and operation of freeway‐to‐freeway connector metering is the lack of up‐to‐date queue storage length design guidance. In this study, it was found that ramp queue is dynamically related to the metering rate, on‐ramp demand, and traffic flow arrival pattern. Hence, simply using an average demand cannot provide accurate queue length estimation and is also not suitable for queue storage design where the maximum or a percentile queue length is generally used. A mesoscopic queue length simulation model was developed based on the input–output method for estimating queue lengths under various demand‐to‐capacity ratio scenarios. Simulation results indicate that for under‐saturated situations, the ramp queue may exist temporally due to the random short‐term surge of traffic arrivals, and the exponential function could best capture the relationship between queue length and demand‐to‐capacity ratio. For over‐saturated situations, the ramp queue tends to prolong linearly with the demand‐to‐capacity ratio. Based on the simulation, it was recommended that queue storage length be designed as 4.3% of on‐ramp demand when demand is lower than 1200 vph or 2.3% when demand is between 1200 and 2400 vph. Copyright © 2016 John Wiley & Sons, Ltd.     

Toll pricing framework under logit‐based stochastic user equilibrium constraints

This paper addresses the toll pricing framework for the first‐best pricing with logit‐based stochastic user equilibrium (SUE) constraints. The first‐best pricing is usually known as marginal‐cost toll, which can be obtained by solving a traffic assignment problem based on the marginal cost functions. The marginal‐cost toll, however, has rarely been implemented in practice, because it requires every specific link on the network to be charged. Thus, it is necessary to search for a substitute of the marginal cost pricing scheme, which can reduce the toll locations but still minimize the total travel time. The toll pricing framework is the set of all the substitute toll patterns of the marginal cost pricing. Assuming the users' route choice behavior following the logit‐based SUE principle, this paper has first derived a mathematical expression for the toll pricing framework. Then, by proposing an origin‐based variational inequality model for the logit‐based SUE problem, another toll pricing framework is built, which avoids path enumeration/storage. Finally, the numerical test shows that many alternative pricing patterns can inherently reduce the charging locations and total toll collected, while achieving the same equilibrium link flow pattern. Copyright © 2013 John Wiley & Sons, Ltd.     

A revised branch‐and‐price algorithm for dial‐a‐ride problems with the consideration of time‐dependent travel cost

Developing demand responsive transit systems are important with regard to meeting the travel needs for elderly people. Although Dial‐a‐ride Problems (DARP) have been discussed for several decades, most researchers have worked to develop algorithms with low computational cost under the minimal total travel costs, and fewer studies have considered how changes in travel time might affect the vehicle routes and service sequences. Ignoring such variations in travel time when design vehicle routes and schedules might lead to the production of inefficient vehicle routes, as well as incorrect actual vehicle arrival times at the related nodes. The purpose of this paper is to construct a DARP formulation with consideration of time‐dependent travel times and utilizes the traffic simulation software, DynaTAIWAN, to simulate the real traffic conditions in order to obtain the time‐dependent travel time matrices. The branch‐and‐price approach is introduced for the time‐dependent DARP and tested by examining the sub‐network of Kaohsiung City, Taiwan. The numerical results reveal that the length of the time window can significantly affect the vehicle routes and quantitative measurements. As the length of the time window increases, the objective value and the number of vehicles will reduce significantly. However, the CPU time, the average pickup delay time, the average delivery delay time and the average actual ride time (ART)/direct ride time (DRT) will increase significantly as the length of the time window increases. Designing the vehicle routes to reduce operating costs and satisfy the requirements of customers is a difficult task, and a trade‐off must be made between these goals. Copyright © 2014 John Wiley & Sons, Ltd.     

Assessing the effects of several variables on freight train fuel consumption and performance using a train performance simulator

The impact of several variables on freight train fuel consumption and performance are assessed using a train performance simulator. These variables include: wind, precipitation, number of cars, and number and type of locomotives. The input to the train performance simulator includes data related to train characteristics and data related to external conditions such as weather. The simulator output represents fuel consumption expected under a given set of conditions. Graphical and cost/benefit approaches were used to assess operations alternatives.     

Indirect production function and the output effect of public transit subsidies

This paper uses an indirect production function to decompose the effects of subsidies on output into the lump-sum, cost and inefficiency effects. Using 2006 data for U.S. transit systems it estimates an indirect production function and uses the results to calculate these effects. It finds that the lump-sum effects exceed the other effects and that the average total effect of the subsidies is a 4.72% increase in output. The range of the output change shows that in many transit systems the output increases from the subsidies are quite large. The paper suggests that reductions in allocative inefficiencies from the subsidies would result in very large increases in output.     

Short‐term prediction of traffic parameters—performance comparison of a data‐driven and less‐data‐required approaches

The travel decisions made by road users are more affected by the traffic conditions when they travel than the current conditions. Thus, accurate prediction of traffic parameters for giving reliable information about the future state of traffic conditions is very important. Mainly, this is an essential component of many advanced traveller information systems coming under the intelligent transportation systems umbrella. In India, the automated traffic data collection is in the beginning stage, with many of the cities still struggling with database generation and processing, and hence, a less‐data‐demanding approach will be attractive for such applications, if it is not going to reduce the prediction accuracy to a great extent. The present study explores this area and tries to answer this question using automated data collected from field. A data‐driven technique, namely, artificial neural networks (ANN), which is shown to be a good tool for prediction problems, is taken as an example for data‐driven approach. Grey model, GM(1,1), which is also reported as a good prediction tool, is selected as the less‐data‐demanding approach. Volume, classified volume, average speed and classified speed at a particular location were selected for the prediction. The results showed comparable performance by both the methods. However, ANN required around seven times data compared with GM for comparable performance. Thus, considering the comparatively lesser input requirement of GM, it can be considered over ANN in situations where the historic database is limited. Copyright © 2016 John Wiley & Sons, Ltd.     

Performance based clustering for benchmarking of US airports

Managing service operations is gaining significant attention in both academic and practitioner circles. In this broad area, performance evaluation and process improvement of airlines and air carriers has been the focus of several studies. Although efficient airport operations are critical for improved performance of airlines and air carriers, few studies have focused on airport performance measurement. This study evaluates the operational efficiencies of 44 major US airports across 5 years using multi-criteria non-parametric models. These efficiency scores are treated by a clustering method in identifying benchmarks for improving poorly performing airports. Efficiency measures are based on four resource input measures including airport operational costs, number of airport employees, gates and runways, and five output measures including operational revenue, passenger flow, commercial and general aviation movement, and total cargo transportation. The methodology presented here can be generalized to other industries and institutions.     

Capital structure in the world airline industry

This article presents a managerial approach to the airline capital structure through a definition of an efficient frontier. To develop the analysis a technique called data envelopment analysis was used. This paper tests the hypothesis that airline industry's financial performance depends on companies keeping a reasonable level of leverage and also seeks to establish this level. The research identifies the biggest airline companies which use capital efficiently to generate return with a low level of fixed assets. In these companies, shareholders' capital represents at least 40% of all funds employed. It could be seen by simplifying the analysis that it is possible to identify the most and the least efficient companies by studying their indebtedness and return on assets. A large proportion of the companies are moving to reduce their level of indebtedness and raise their returns over the course of time. The analysis by country revealed that countries do not offer comparative advantages, with the companies' performance depending fundamentally on their management.     

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.     

Seaport performance analysis using robust non-parametric efficiency estimators

Abstract

Seaport services have been developing year on year, playing an increasingly important role in the economy and the transportation markets of each country. This increases interest in measuring their performance. This paper evaluates the performance of a set of European seaports by means of robust non-parametric approaches. Using order-m and bootstrap procedures, the major problems of traditional data envelopment analysis and free disposal hull methods – concerning noise, presence of outliers and the ‘curse of dimensionality’ – are overcome. With this study considerable levels of inefficiency were found in the European seaports sector.