Determining factors of air passengers’ transfer airport choice in the Southeast Asia – North America market: Managerial and policy implications

Abstract

This paper investigates the factors affecting air passengers’ transfer airport choice in the market between Southeast Asia (SE Asia) and North America (NA). By estimating demand parameters, the study sheds lights on an airport operator’s business strategies, including identifying effective routes to compete for transfer passengers. Specifically, a discrete choice model is applied to estimate air travelers’ utility function from choosing different transfer airports in an origin-destination market. Our dataset consists of 78 city-pairs in the SE Asia–NA market. Instrument variables are used to control for potential endogeneity of airfare, while airport characteristics including minimum connection time (MCT), service quality, size, and detour degree are treated as exogenous. The main empirical findings are: (1) Transfer passengers’ airport choice is determined by an airport’s characteristics including MCT and service quality of flight connection, in addition to the traditional factors such as airfares and travel time. (2) Based on the estimated utility function parameters, we quantify transfer passengers’ willingness-to-pay for several characteristics of the transfer airport. (3) With our estimation results, a case study is conducted for Incheon International Airport to identify candidate routes that have the greatest potential for the airport to increase the number of transfer passengers.