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.

     

A three-stage least squares approach to the analysis of airline strategies for aircraft size and airline frequency on the north Atlantic: an airline case study

In response to increasing demand, airlines may increase capacity by increasing the frequency of flights or they may choose to increase aircraft size. This may yield operating cost economies. If the airports they operate from are capacity constrained, they will be limited in the extent that they can change frequency which will limit their ability to compete with the number of frequencies offered. This article focuses on this trade-off and pays particular attention to the practices of a specific airline. Conclusions are offered on the impact of inter alia competition, changes in aircraft technology, 9/11 and the impact of slot constraints. It appears that changes in size are more important than frequency, which is consistent with the presence of slot constraints and there is a significant impact of competition. As the concentration of carriers increases, so aircraft size falls. 9/11 also has a significant impact on traffic whereas the introduction of the Boeing 777, as an illustration of a change in technology, does not.     

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.     

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.     

The planning of aircraft routes and flight frequencies in an airline network operations

This research is aimed at developing a model that maximizes system profit when determining the aircraft routes and flight frequencies in a network. The model employs network flow techniques to effectively collect or deliver passenger flows from all origins to all destinations using non‐stop and multi‐stop flights in multi‐fleet operations. The model was formulated as a multi‐commodity network flow problem. A Lagrangian‐based algorithm was developed to solve the problem. To test the model in practice, a case study is presented.     

Regulating inter-firm agreements: The case of airline codesharing in parallel networks

We compare aviation markets under conditions of competition, codesharing contracts and anti-trust immune alliances, assuming that demand for flights depends on both fares and the level of frequency offered. Using a hybrid competitive/cooperative game theoretic framework, we show that the stronger the inter-airline agreement on overlapping routes, the higher the producer surplus. On the other hand, consumer surplus and overall social welfare are maximized under limited codesharing agreements. Partial mergers appear preferable to no agreement in ‘thin’ markets, in which both demand and profit margins are relatively low. Inter-governmental agreements are also analyzed and we show that bilaterals create the least favorable market outcomes for consumers and producers. Finally, a realistic case study demonstrates that under asymmetric and uncertain demand, codesharing on parallel links may be preferable to competitive outcomes for multiple consumer types.     

Exploring ride-hailing fares: an empirical analysis of the case of Madrid

Transportation - Ride-hailing is an emerging service that is transforming door to door mobility in urban areas. Users can easily request a ride through a smartphone app that informs them of the...     

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.     

The impact of terminal handling charges on overall shipping charges: an empirical study

Before the introduction of terminal handling charges (THCs), traditional freight rates included both ocean freight charges and terminal charges at ports. Since the introduction of THCs in 1991, the freight rate has become a “port-to-port” charge that covers only the sea leg, while the on-shore costs of using the container terminals are charged separately as THCs. Although both THCs and freight rates are collectively set by conferences, in this study we argue that the former are easier to enforce because they are invariant to other attributes such as haulage distance, inland transport services and types of commodity being shipped. This argument is consistent with the empirical findings from this study that suggest the separation of ocean freight rates from terminal charges has increased the overall shipping charges. In addition, we find that THCs affect the Hong Kong container handling industry by lowering its throughput.     

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.     

Decomposing passenger transport futures: Comparing results of global integrated assessment models

The transport sector is growing fast in terms of energy use and accompanying greenhouse gas emissions. Integrated assessment models (IAMs) are used widely to analyze energy system transitions over a decadal time frame to help inform and evaluating international climate policy. As part of this, IAMs also explore pathways of decarbonizing the transport sector. This study quantifies the contribution of changes in activity growth, modal structure, energy intensity and fuel mix to the projected passenger transport carbon emission pathways. The Laspeyres index decomposition method is used to compare results across models and scenarios, and against historical transport trends. Broadly-speaking the models show similar trends, projecting continuous transport activity growth, reduced energy intensity and in some cases modal shift to carbon-intensive modes - similar to those observed historically in a business-as-usual scenario. In policy-induced mitigation scenarios further enhancements of energy efficiency and fuel switching is seen, showing a clear break with historical trends. Reduced activity growth and modal shift (towards less carbon-intensive modes) only have a limited contribution to emission reduction. Measures that could induce such changes could possibly complement the aggressive, technology switch required in the current scenarios to reach internationally agreed climate targets.     

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.     

An empirical assessment of the feasibility of battery electric vehicles for day-to-day driving

Driven by sustainability objectives, Australia like many nations in the developed world, is considering the option of battery electric vehicles (BEVs) as an alternative to conventional internal combustion engine vehicles (ICEVs). In addition to issues of capital and running costs, crucial questions remain over the specifications of such vehicles, particularly the required driving range, recharge time, re-charging infrastructure, performance, and other attributes that will be of importance to consumers. With this in mind, this paper assesses (hypothetically) the extent to which current car travel needs could be met by BEVs for a sample of motorists in Sydney assuming a home-based charging set-up, which is likely to be the primary option for early adopters of the technology. The approach uses five weeks of driving data recorded by GPS technology and builds up home-home tours to assess the distances between (in effect) charging possibilities. An energy consumption model based on characteristics of the vehicle, and the speeds recorded by the GPS is adapted to determine the charge used, while a battery recharge function is used to determine charging times based on the current battery level. Among the most pertinent findings are that over the five weeks, (i) BEVs with a range as low as 60 km and a simple home-charge set-up would be able to accommodate well over 90% of day-to-day driving, (ii) however the incidence of tours requiring out-of-home charging increases markedly for vehicles below 24 kWh (170 km range), (iii) recharge time in itself has little impact on the feasibility of BEVs because vehicles spend the majority of their time parked and (iv) effective range can be dramatically impacted by both how a vehicle is driven and use of electrical auxiliaries, and (v) while unsuitable for long, high-speed journeys without some external re-charging options, BEVs appear particularly suited for the majority of day-to-day city driving in big cities where average journey speeds of 34 km/h are close to optimal in terms of maximising vehicle range. The paper has implications for both policy-makers and auto manufacturers in breaking down some of the (perceived) barriers to greater uptake of BEVs in the future.     

An assessment of the benefits of the walking school bus in Christchurch,New Zealand

A Walking School Bus involves parents or other adults escorting a group of children on a set route to school. The first one was established in 1996 in Canada. They can now be found in a variety of countries, including New Zealand. Many of the benefits associated with them are based on the general benefits of affecting a modal shift away from cars in favour of walking. However, there is still relatively little known about the less quantifiable benefits of them, and there has been some suggestion that they can adversely affect children’s independent mobility. This research examined the perceived benefits of Walking School Buses by interviewing people involved in the day to running of the scheme in Christchurch, New Zealand. The results suggest that walking school buses have many social benefits and that if anything; they encourage children’s independent mobility.     

Understanding the development of business travel policies: Reducing business travel,motivations and barriers

Business travel accounted in the UK in 2010 for 3% of trips and 10% of the UK’s domestic distance travelled (Department for Transport, 2011, p. 4). However, it is an under researched area, even though in major cities, where transport networks are most congested, it forms a higher proportion of trips. The paper presents the findings of a study of changing business travel practices and policies affecting the briefcase traveller. The findings are drawn from semi-structured interviews with key actors in stakeholder and private sector organisations based predominately in London and a survey of 150 business travellers. The study was designed to understand the motivations and attitudes towards reducing business travel and the compromises that needed to be made to balance reducing carbon emissions and cost, whilst maintaining or improving productivity and meeting the requirements of the business.The main findings show the approaches and implications of these approaches to reduce carbon emissions and costs, improve productivity and the impact of ICT. The findings show the importance of external reporting through the Carbon Reduction Commitment, the Carbon Disclosure Project and corporate responsibility reports as a motivator to develop new policies. The paper goes on to outline how some factors can be both barriers and motivations for change, such as customers insisting on meeting their suppliers face-to-face, but also requiring information on carbon emissions as part of the Carbon Disclosure Project. Individuals can also be both a barrier and a motivator to change. The role of existing travel and meeting habits and the view of some that travelling is a perk linked to status symbols have proved to be a hard barriers to overcome. However, a technically literate younger generation used to communicating virtually have challenged these practices.     

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.     

Travel-based multitasking: review of the empirical evidence

This paper reviews 58 studies with empirical evidence on travel-based multitasking, identifies gaps in terms of data collection methods and provides a comprehensive review of findings about the significance of variables with an impact on the prevalence and type of multitasking. We identified the limitations of quantitative or qualitative surveys and advocate a mixed methods approach to provide an in-depth understanding of travel-based multitasking. We revealed that cross-country comparisons are missing due to the lack of empirical evidence outside the developed countries. While there are indications of increasing multitasking with mobile devices, we found only two longitudinal surveys that provide evidence. We call for a standardisation of definitions of multitasking activities to enable more longitudinal research. We identified 75 variables that were tested for impact on travel-based multitasking in previous research, of which 60 were found to be significant. Sufficient evidence (i.e. minimum three papers), however, only exists for age, gender, trip duration, travel mode, trip purpose, time of the day and day of the week of the trip and the presence of a travel companion. Therefore, more research is suggested to determine the influence of attitude, comfort, availability of equipment, time use and spatial attributes on the type and prevalence of travel-based multitasking.     

User perceptions and engineering definitions of highway level of service: an exploratory statistical comparison

The level of service (LOS) concept in the Highway Capacity Manual has been used as a qualitative measure representing freeway operational conditions for over 35 years. One key element that has not been adequately addressed is how road users perceive LOS. This exploratory research examines road-user perceptions of freeway LOS by presenting study participants with a series of video clips of various traffic conditions (taken from cameras on overpasses to allow a complete view of the traffic stream) and asking them their perceptions of LOS. A random effects ordered probability model is then used to statistically link participant-recorded perceptions of LOS with measurable traffic conditions (speed, density, flow, percentage of trucks, vehicle headways) and participant characteristics. The findings suggest that the Highway Capacity Manual’s use of traffic density as a single performance measure for LOS does not accurately reflect road-user perceptions. The statistical analysis shows that a number of attributes besides traffic density determine public perceptions of LOS and that these perceptions vary depending on both traffic conditions and road-user characteristics.