Airline network competition: Full-service airlines, low-cost airlines and long-haul markets

The paper discusses airline network competition. Low-cost airlines and conventional airlines have distinctly different strategies and network types. This determines their ability to compete with other airlines in specific markets. The paper discusses the lack of competition between conventional airlines in local markets, and sees why low-cost airlines are the primary source of competition in such markets. Conventional airlines are relatively strong on long-haul markets, using their networks to keep costs per seat relatively low. Charter airlines show that a long-haul low-cost strategy is feasible For scheduled low-cost airlines, this may be more difficult, but this does not automatically mean that low-cost airlines cannot enter thick long-haul markets.     

Workshop report - Beyond competitive tendering

Most countries contemplating the introduction of competition-based organizational forms did not perceive the British deregulated bus regime to be the way forward. A deeper analysis of facts and an international coverage of the local successes of that regime remained marginal and, as a result, the reputation of deregulated regimes remained bad or - at best - a contentious issue. The rush for competitive tendering was further stimulated by the European Commission’s endeavour to enact a Regulation that put forward competitive tendering of exclusive contracts as the preferred way to organise local public transport markets. Yet, as discussed in this workshop, deregulation in various guises may well play a growing role in local and regional transport. This is already visible in long-distance coach transport and in (international) European railway markets as from 2010. The workshop paper discusses whether such competition-based institutional alternatives to competitive tendering can provide efficiency and service improvements, how such competition-based alternatives should be ‘regulated’ and, alternatively, how a non-competitive direct award could perhaps still guarantee good performance.     

‘Regulated deregulation’ of local bus services—An appraisal of international developments

The deregulation of the British bus sector (outside London) in 1986 was the start of a debate on the merits of ‘deregulation’ and ‘competitive tendering’. The period that followed was rich in lessons. New Zealand was at the time the only other country engaging in a reform based upon market initiative (implemented in 1991). Other countries chose for a less extreme and more consensual way to introduce competitive incentives, choosing the fundamentally different competitive tendering (CT) path. As a result, the so-called ‘Scandinavian model’ developed, based upon the London example of route tendering. Later the Netherlands adopted a network tendering approach, resembling the French practice of network tendering though with more operator freedom.     

Workshop 3B: Governance,ownership and competition issues in deregulated (free market) public transport: Lessons that can be learnt from developed and developing economies

The past emphasis in this conference series has been on the best ways to deregulate regulated public transport markets. This workshop reverses this process by examining the best ways to regulate deregulated public transport markets. A hierarchy of regulatory needs is identified and three hybrid models examined, based loosely on experience from Great Britain, New Zealand and Sweden. It is argued that deregulated public transport markets are a global phenomenon but regulatory measures should reflect local requirements. The resultant process of glocalisation might result in regulatory measures that focus on the rules of law and their enforcement in emerging public transport markets (such as urban transport in Sub Saharan Africa and for the soon to be competitive inter urban market in Germany) but that focus on guidance for network integration and incentivisation for welfare maximisation in more mature public transport markets (as in Great Britain, New Zealand and Sweden).     

Four decades of changing transport policy in Santiago,Chile

During the last forty years, Santiago has experienced a series of drastic changes in public transport policies. These changes have ranged widely, from total deregulation to processes that concentrated the management of public transport within the hands of the public sector.     

Long-term development of express coach services in Britain

Express coach services compete for longer distance market with car and rail, and largely cater for the leisure, tourism, and visiting friends and relatives. markets. Britain deregulated its express coach system in 1980, and it is now opportune to examine long-term impacts of that change. The initial impacts were reviewed by the authors in 1986 (Robbins & White, 1986) but such impacts do not necessarily match long-term outcomes. Monitoring of the British system has been conducted by examining service changes and data on ridership, together with financial performance of the main operator groups and technical press coverage. It can be shown that a dominant position has been retained by the major operator (National Express), with a continued decline in the role of smaller independent operators in the all-year-round daily network. However, new competition has emerged from other large groups (most notably Stagecoach ‘Megabus’ in 2003). The paper analyses the operating and marketing strategies of the new operator and contrasts these strategies with those adopted in the 1980s. Implications for the future development of the network in Britain are outlined.     

Low-cost carriers in Asia: Deregulation, regional liberalization and secondary airports

While the demand for low-cost air transportation is potentially huge in Asia, development of low-cost carriers (LCCs) lags behind the region's overall aviation development, and certainly lags behind the LCC development in North America and Europe. It has been noted that market conditions and the regulatory environment of Asia are different from those of North America and Europe. What are the main differences here; and how do these differences impact market entry and success of Asian LCCs? This paper describes salient features of Asian LCCs and their developments. It examines the impact of Asia's domestic and international airline regulations and airport infrastructure on the performance of its LCCs. We find that the “Southwest effect” may also exist in Asia and that the development of low-cost terminals may compensate, at least partly, the scarcity of secondary airports in the region. The experiences of Thailand and China are investigated as case studies.     

Effect of open skies in the Middle East region

This research aims to estimate potential inter-regional passenger flows for air transport in the Middle East under open skies polices, once deregulation agreements are reached between neighboring countries. To arrive at reasonable demand estimates, Western and Eastern European demand data was analyzed as a first step, since it is assumed that current Middle Eastern demand is distorted as a direct result of regional political instability. The major factors affecting demand, based on the European dataset, included population size, gross domestic product (GDP) per capita, absolute difference in GDP per capita between two countries, great circle distance and membership of the European Union and World Trade Organization. Subsequently, a 21 country database was estimated for passenger flow in the Middle East region on an average peak season day. The demand estimations became input for a hub location model (p-hub median formulation) in order to achieve the second major aim of this research, objective identification of potential regional gateways. The results proved robust to both single and multiple allocation model assumptions, with Cairo and Tehran consistently achieving hub status, along with Istanbul and Riyadh, as the number of potential hubs increased. Finally, this research shows that under conditions of peace, given existing socio-economic indicators, inter-regional passenger demand flow could increase by upwards of 51% and regulatory authorities ought to consider the necessary infrastructure and demand management policies to enable the conservative regional demand growth estimated.     

The economics of railway safety

This paper reviews the statistics and economics of railway safety in Great Britain, the European Union and the United States, together with some results for Finland and Japan. In these countries railway safety has improved over recent decades. That finding applies both to train accidents and to personal accidents such as persons struck by trains. Fatal train collisions and derailments command most attention even though they are infrequent and account for only a small minority of railway fatalities. Great Britain, the EU and the USA formally espouse conventional cost benefit analysis for the appraisal of railway safety measures, using the same valuations for the prevention of casualties as are used in road safety appraisal. However there are often strong institutional, legal and political pressures towards adopting railway safety measures with safety benefit: cost ratios well below 1. The best-documented examples of this are automatic train protection systems, which are discussed in the paper. Apart from trespassers, the largest group of railway fatalities occur at level crossings, which the paper also discusses. Level crossing safety measures would seem to be an appropriate subject for cost benefit analysis, but there are few case-studies in the literature. Over the last few decades, the railways in many countries have been privatised or deregulated with the aim of improving their economic performance. Such changes have the potential to affect safety. The paper reviews evidence of the effects on safety of railway restructuring in Great Britain, Japan and the United State, and finds no evidence that safety deteriorated.     

Evaluating the long term impacts of transport policy: An initial assessment of bus deregulation

Local buses in Britain, outside London, were ‘deregulated’ as a result of the 1985 Transport Act, with most of the organisational changes implemented in 1986 but many of the ownership changes occurring over a longer period. By contrast, in London, the 1984 London Regional Transport Act introduced a system of comprehensive tendering – but it took 10 years for the organisational and ownership changes to be fully implemented. This paper examines the long term impacts of these changes. A key issue when examining long term changes is that of the counterfactual – what would have happened if the changes had not occurred? An econometric model of the demand for local bus services in Britain is outlined and used in conjunction with extrapolative methods for key variables such as fares and bus kms to determine demand-side counterfactuals. Some analyses of subsidy and of costs will also be outlined. This will then permit the examination of welfare change by estimating changes in consumer and producer surpluses, updating earlier studies. It is found that outside London, bus demand declined strongly, at least up to the year 2000 and some of this reduction can be ascribed to deregulation. By contrast in London, demand has generally been increasing. However, in both areas operating costs also declined strongly, again up to 2000, but since then there have been strong increases in costs and subsidy. Our initial finding is that there are net welfare increases both outside and inside London, but with welfare increases per capita being five times greater in London than elsewhere. However, sensitivity analysis shows that our results are sensitive to the specification of the modelling system and assumptions made concerning the counterfactual, particularly for the results for London.