Coordinated scheduling models for allied airlines

Recently, as a means of forming global networks and improving operation efficiency, major air carriers have increasingly entered into alliances with other carriers. Fleet routing and flight scheduling are not only important in individual airline operations, but also affect the alliances. The setting of a good flight schedule can not only enhance allied airline operating performance, but can also be a useful reference for alliance decision-making. In this research, we develop several coordinated scheduling models, which will help the allied airlines solve for the most satisfactory fleet routes and timetables under the alliance. We employ network flow techniques to construct the models. The models are formulated as multiple commodity network flow problems which can be solved using a mathematical programming solver. Finally, to evaluate the models, we perform a case study based on real operating data from two Taiwan airlines. The preliminary results are good, showing that the models could be useful for airline alliances.     

Open skies and open gates

Airline alliances are a global transportation issue which is the subject of increasing attention in the literature. A simple simulation model of air carrier competition in a network is constructed to examine the economic welfare effects of different levels of alliance between the carriers serving the network. The simulations confirm that consumers derive benefits from improved access to passenger markets. However, in many cases, carriers tend to gain from a limited alliance such as code-sharing. This suggests that closer alliances may be driven by other considerations such as raising barriers to entry or the cross-subsidisation of international routes through greater control of the domestic market.     

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.

     

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.     

The environmental effects of airline carbon emissions taxation in the US

This study investigates how air traffic emissions taxes may impact carbon emissions in the US. The magnitude of emissions savings in the US domestic airline industry that would result from lower demand for air travel as taxes are levied and air fares increase is estimated. At the same time, the air-automobile substitution effect is considered and it is argued that some air travelers may divert to automobiles, thus increasing automobile carbon emissions. Both the analysis of the aggregate US domestic airline industry and the study of a sample of US domestic route markets indicate that potentially sizeable increases in automobile traffic and related emissions may substantially reduce the environmental benefits of air travel carbon emissions taxes. In some instances, carbon emissions may even increase in short-haul markets. Sensitivity analyses are performed to demonstrate the robustness of these findings.     

Air carrier demand

Modeling air carrier demand is instrumental to understanding the relative importance of competitive forces that shape the airline environment and determine a carrier's market share. This paper develops a conceptual framework for analyzing carrier demand in a competitive context and applies that framework to study air carrier choice. This framework can be used by carriers to assess the market share and revenue implications of service design, pricing, marketing, and promotional strategies. We adopt an individual traveler choice approach to identify and measure the relative importance of factors which influence air travel demand. Travelers' patterns of air travel, perceptions of carrier service, frequent-flyer program membership, and carrier choice behavior are used to estimate models of individual carrier choice. These models indicate the importance of carrier presence in the origin market, carrier service in a city pair market (share of flights), carrier quality of service reflected in ratings by individual travelers, and traveler loyalty reflected in frequent-flyer program membership on carrier choice. The importance of these variables and the specific quantitative relationship estimated, can be used to estimate the market share impact of service design, pricing, marketing, and promotional changes. The empirical results of this study demonstrate the dramatic impact of frequent-flyer program participation on carrier choice for individual flights. These effects are particularly strong among the most important air carrier market, the frequent business traveler.     

Access to and competition between airports: a case study for the San Francisco Bay area

In this paper (nested) logit models that describe the combined access mode-airport-choice are estimated. A three level nested logit model is rejected. A two level nested logit model with the airport choice at the top level and the access mode choice at the lower level is preferred. From the estimation results, it is concluded that business travelers have a higher value of time than leisure travelers. In the (conditional) access mode choice, leisure travelers have a higher access cost elasticity (in absolute value), while business travelers have a higher access time elasticity (in absolute value). In general, access time is of large importance in the competition between airports in a region.     

Code sharing,joint fares,and competition in the regional airline industry

In the wake of airline deregulation, virtually all large jet carriers have entered into cooperative marketing agreements that involve shared designator codes and joint fares with commuter airlines. This paper examines the development of these agreements, the role they play in the competitive strategies of major and commuter airlines. and the implications of these agreements for the structure of the airline industry and for service to travelers to and from small communities.     

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.     

Airline-driven ground delay programs: A benefits assessment

Three decades of research studies in ground delay program (GDP) decision-making, and air traffic flow management in general, have produced several analytical models and decision support tools to design GDPs with minimum delay costs. Most of these models are centralized, i.e., the central authority almost completely decides the GDP design by optimizing certain centralized objectives. In this paper, we assess the benefits of an airline-driven decentralized approach for designing GDPs. The motivation for an airline-driven approach is the ability to incorporate the inherent differences between airlines when prioritizing, and responding to, different GDP designs. Such differences arise from the airlines’ diverse business objectives and operational characteristics. We develop an integrated platform for simulating flight operations during GDPs, an airline recovery module for mimicking the recovery actions of each individual airline under a GDP, and an algorithm for fast solution of the recovery problems to optimality. While some of the individual analytical components of our framework, model and algorithm share certain similarities with those used by previous researchers, to the best of our knowledge, this paper presents the first comprehensive platform for simulating and optimizing airline operations under a GDP and is the most important technological contribution of this paper. Using this framework, we conduct detailed computational experiments based on actual schedule data at three of the busiest airports in the United States. We choose the recently developed Majority Judgment voting and grading method as our airline-driven decentralized approach for GDP design because of the superior theoretical and practical benefits afforded by this approach as shown by multiple recent studies. The results of our evaluation suggest that adopting this airline-driven approach in designing the GDPs consistently and significantly reduces airport-wide delay costs compared to the state-of-the-research centralized approaches. Moreover, the cost reduction benefits of the resultant airline-driven GDP designs are equitably distributed across different airlines.     

Travel time variability and airport accessibility

We analyze the cost of access travel time variability for air travelers. Reliable access to airports is important since the cost of missing a flight is likely to be high. First, the determinants of the preferred arrival times at airports are analyzed. Second, the willingness to pay (WTP) for reductions in access travel time, early and late arrival time at the airport, and the probability to miss a flight are estimated, using a stated choice experiment. The results indicate that the WTPs are relatively high. Third, a model is developed to calculate the cost of variable travel times for representative air travelers going by car, taking into account travel time cost, scheduling cost and the cost of missing a flight using empirical travel time data. In this model, the value of reliability for air travelers is derived taking “anticipating departure time choice” into account, meaning that travelers determine their departure time from home optimally. Results of the numerical exercise show that the cost of access travel time variability for business travelers are between 0% and 30% of total access travel cost, and for non-business travelers between 0% and 25%. These numbers depend strongly on the time of the day.     

Logsums for utility-maximizers and regret-minimizers,and their relation with desirability and satisfaction

This paper studies to what extent the Logsum-measure of user benefits relates to travelers’ perceptions of choice set-desirability and choice-satisfaction. Knowing these relations is important since researchers have recently started to analyze and interpret user benefits in general – and Logsums in specific – in terms of these more behaviorally oriented notions, rather than in terms of expected utility. Participants to a stated route choice experiment were asked to indicate, after each choice made, to what extent they considered the choice set to be desirable, or to what extent they were satisfied with the chosen alternative. These measurements were correlated with Logsums that were computed for each choice situation. In addition, the paper derives a regret-based Logsum (which gives the expected regret of a choice situation) and presents a comparison with its utilitarian counterpart. Also for this regret-based Logsum, correlations with desirability- and satisfaction-ratings are computed. As a general finding, it appears that all computed correlations are rather weak. This suggests that, at least in the context of our data, the utility-based Logsum and its regret-based counterpart appear to have only a fairly weak connection with the behavioral notions of choice set-desirability and choice-satisfaction.     

Do social norms regarding carbon offsetting affect individual preferences towards this policy? Results from a stated choice experiment

This study investigates the idea that people’s willingness to offset flight-related carbon emissions is a function of the collective participation rate, which can be regarded as a social norm, towards carbon offsetting. Additionally, we reveal people’s preferences toward two other environmental policies; a baggage allowance and airline eco-efficiency index. A discrete choice experiment is designed and administrated among a sample of air travelers. The results indicate that carbon offsetting generates utility, with people gaining more utility when the collective participation rate is high. Additionally, it was found that the baggage allowance and the eco-efficiency index strongly influenced respondents’ airline choices. People also became more sensitivity towards a baggage allowance and the eco-efficiency label, when the collective offsetting rate was high.     

Airline competition and market frequency: A comparison of the s-curve and schedule delay models

We compare two common ways of incorporating service frequency into models of airline competition. One is based on the so called s-curve, in which, all else equal, market shares are determined by frequency shares. The other is based on schedule delay—the time difference between when travelers wish to travel and when flights are available. We develop competition models that differ only with regard to which of the above approaches is used to capture the effect of frequency. The demand side of both models is an approximation of a nested logit model which yields endogenous travel demand by including not traveling in the choice set. We find symmetric competitive equilibrium for both models analytically, and compare their predictions concerning market frequency with empirical evidence. In contrast to the s-curve model, the schedule delay model depicts a more plausible relationship between market share and frequency share and accurately predicts observed patterns of supply side behavior. Moreover, the predictions from both models are largely the same if we employ numerical versions of the model that capture real-world aspects of competition. We also find that, for either model, the relationship between airline frequency and market traffic is the same whether frequency is determined by competitive equilibrium, social optimality, or social optimality with a break-even constraint.     

Using the revenues from congestion pricing

The economic theory behind congestion pricing relies on using the revenues to help compensate highway users. But can practical methods of using revenues come close to achieving this compensation, and still have salient appeal to important political groups? This paper investigates the possibilities for designing a package of revenue uses that can achieve these twin goals. The suggested approach returns two-thirds of the revenues to travelers through travel allowances and tax reductions, and uses the rest to improve transportation throughout the area, including affected business centers. By replacing regressive sales and fuel taxes, this approach offsets the tendency of the prices alone to have a regressive distributional impact. By lowering taxes, funding new highways, improving transit, and upgrading business centers, the package provides inducements for support from several key interest groups. The potential amounts of money involved are discussed using nationwide data, and in more detail using a case study of ubiquitous facility pricing throughout the Los Angeles region. Illustrative calculations of the effects on various individuals confirm that such a package can create net benefits for a wide spectrum of people and interest groups.     

A path-based flow formulation for the traffic assignment problem

In order to improve cooperation between traffic management and travelers, traffic assignment is the key component to achieve the objectives of both traffic management and route choice decisions for travelers. Traffic assignment can be classified into two models based on the behavioral assumptions governing route choices: User Equilibrium (UE) and System Optimum (SO) traffic assignment. According to UE and SO traffic assignment, travelers usually compete to choose the least cost routes to minimize their own travel costs, while SO traffic assignment requires travelers to work cooperatively to minimize overall cost in the road network. Thus, the paradox of benefits between UE and SO indicates that both are not practical. Thus, a solution technique needs to be proposed to balance UE and SO models, which can compromise both sides and give more feasible traffic assignments. In this paper, Stackelberg game theory is introduced to the traffic assignment problem, which can achieve the trade-off process between traffic management and travelers. Since traditional traffic assignments have low convergence rates, the gradient projection algorithm is proposed to improve efficiency.     

Measuring the environmental efficiency of the global aviation fleet

This research analyses the environmental footprint of the airline industry in an attempt to highlight potential paths for improvement. We develop a directional economic-environmental distance function (DEED) which accounts for the production of both desirable and undesirable output and the potential for constrained increases in input utilization. This research applies the modeling framework to analyze the potential to reduce noise and airborne pollutants emitted by aircraft–engine combinations given the current state of aeronautical technology. The global aircraft–engine market is viewed from the regulatory perspective in order to compare the single environmental and operational efficient frontier to that of the airline carriers, and environmental objectives. The results of DEED are then applied in order to substitute the fleets serving Schipol, Amsterdam and Arlanda, Stockholm airports in June 2010 with the benchmark aircraft. The results highlight the inefficiencies of the current airline fleets and that the IPCC values of externalities are a magnitude of TEN too low to encourage changes in the global fleet hence the need for government intervention.     

Multimodal travel groups and attitudes: A latent class cluster analysis of Dutch travelers

For developing sustainable travel policies, it may be helpful to identify multimodal travelers, that is, travelers who make use of more than one mode of transport within a given period of time. Of special interest is identifying car drivers who also use public transport and/or bicycle, as this group is more likely to respond to policies that stimulate the use of those modes. It is suggested in the literature that this group may have less biased perceptions and different attitudes towards those modes. This supposition is examined in this paper by conducting a latent class cluster analysis, which identifies (multi)modal travel groups based on the self-reported frequency of mode use. Simultaneously, a membership function is estimated to predict the probability of belonging to each of the five identified (multi)modal travel groups, as a function of attitudinal variables in addition to structural variables. The results indicate that the (near) solo car drivers indeed have more negative attitudes towards public transport and bicycle, while frequent car drivers who also use public transport have less negative public transport attitudes. Although the results suggest that in four of the five identified travel groups, attitudes are congruent with travel mode use, this is not the case for the group who uses public transport most often. This group has relatively favorable car attitudes, and given that many young, low-income travelers belong to this group, it may be expected that at least part of this group will start using car more often once they can afford it. Based on the results, challenges for sustainable policies are formulated for each of the identified (multi)modal travel groups.     

Airline ambidextrous competition under an emissions trading scheme – A reference-dependent behavioral perspective

This study presents a reference-dependent Hotelling model for analyzing airline competition in pricing and green transportation investment, as well as the resulting financial performance under the European Union emission trading scheme. One feature of the proposed methodology is that it embeds psychological benefits/costs of consumers to characterize consumer attitudes to the increases in airline fare adjustments and improvements in green transportation. This study then investigates the equilibrium solutions for airfare adjustment and green transportation investment margins in different scenarios. The analytical results reveal specific operational conditions under which a cost-efficient airline can gain supreme competitive advantage by increasing both airfare and green transportation investment margins beyond the increases made by competitors under the emission trading scheme, whereas certain specific conditions may favor a cost leadership strategy. Conversely, a cost-inefficient airline can compete with a cost-efficient airline in both market share and profitability using the green transportation investment-differentiation strategy, particularly when consumers perceive the airfare difference as equaling the increased psychological benefit induced by the airline’s green effort.     

Price effects of airlines frequent flyer programs: The case of the dominant firm in Chile

Frequent flyer programs create a switching cost for the consumer and allow firms to obtain rents, for example, by exploiting the principal agent problem existing between the employee who travel and purchases the ticket and the employer paying for that ticket. In Chile LAN is the dominant airline in domestic markets and the only one that has a frequent flyer program (FFP); it faces some competition from two small carriers. Using a unique dataset for Chile, collected by ourselves from airlines websites in 2011 and 2012, we estimate the impact of the dominant airline FFP. For this purpose, we compare for each route the fares between airlines and between weekday trips (that accumulate full miles and are mainly for business purposes) and weekend trips (that accumulate less than full miles and are mainly for leisure purposes). The results show that the differential premium LAN is able to charge for weekday trips due to the FFP is around 35%. Three particularities of the Chilean market help the econometric identification: there is only one hub for all airlines (the capital city of Santiago), there is no business class in domestic flights, and none of the airlines is a low-cost carrier.