Airline Capacity Research Articles

Estimating the effects of price-based environmental policies on aviation emissions at neighboring airports

Given their distinct service and demand characteristics, flight operations at different airports and the resulting emissions are not expected to be uniformly impacted by price-based environmental policies such as carbon offset charges, carbon taxes and carbon credits. In order to understand the variabilities, we explore the relationship among airfare (a proxy for price-based policies), passenger demand, airline capacity decisions, and resulting aviation emissions on several air routes originating from a small and a large airport in the US Midwest. Using a supply-and-demand model, emissions are found to be inelastic to airfare overall, although they appear to respond to airfare tenfold more at the small airport compared to the large one. This inelasticity suggests that price-based measures will have low efficacy towards directly reducing aviation emissions, despite their role in generating financial resources for supporting various carbon removal and reduction technologies and processes. Given that the studied airports are only about a 2-h drive apart, the aforementioned emissions' response variability show that studying and designing price-based policy instruments at national, continental and global scales, as done extensively thus far, may mask significant regional variations. Replicating this more localized approach on airports in different regions of the US as well as other countries may yield a range of insights about where price-based environmental policies could have efficacy and to what extent.

Jet Fuel Price Risk and Proxy Hedging in Spot Markets: A Two-Tier Model Analysis

This paper applies a two-tier model based on fuel hedging (model 1) and the testing of the impact of commodity risk on airline capacity forecasting, which is based on a system dynamics framework (model 2). Model 1 provides a comprehensive examination of the worldwide airline industry, including an analysis of the statistical impact of oil price fluctuations on the sector and the corresponding hedging strategies employed by airlines. This study examines a sample of North American and European airlines over a 10-year timeframe to assess the degree to which these airlines have engaged in kerosene hedging for future periods and the potential impact of such hedging on their corporate value and performance. In model 2, the author integrates a capacity-forecasting model within the system dynamics framework, drawing upon the theory of capacity forecasting. The study examines the impact of commodity risk by analysing the influence of fluctuations in the jet fuel spot price on the average airfare and its subsequent effects on other interdependent capacity variables. The hypotheses presented in this study were formulated based on a comprehensive review of the relevant literature and a causal feedback loop diagram. The diagram effectively depicts the dynamic interrelationships between capacity forecasting and risk variables. Furthermore, the diagram capturing causal feedback loops was transformed into a stock-flow diagram. This diagram was then utilised to evaluate the hypotheses that were derived using a dataset that pertains to the domestic airline market in the United States. The verification of the qualitative and quantitative models demonstrates the proven impact of commodity risk on capacity forecasting.

Airline capacity distribution under financial budget and resource consideration

Capacity distribution is a challenging issue for an airline under financial budget and resource consideration. It is a large-scale optimization problem covering both long-term planning and short-term operating arrangements. This study investigates on the airline capacity distribution problem with financial budget and resource consideration. It contains subproblems of financial budget arrangement, fleet introduction, and fleet assignment. Among them, financial budget is arranged in multiple decision periods, fleet introduction is decided under fixed time points, while fleet assignment is decided under all available time points. To tackle this problem, an integer programming model is formulated for descriptions. Then, an integrated algorithm of modified Variable Neighborhood Search (VNS) and Branch-and-bound (B&B) strategy is developed to find solutions. In detail, a greedy heuristic approach is utilized to generate an initial solution for fleet introduction, the modified B&B strategy is utilized to generate the optimal solution for fleet assignment and the modified VNS is applied to update current solution for a new one with better quality. In addition, budget limit checks are added for financial budget arrangements. Finally, the hybrid algorithm is tested on efficiency and stability. It is also compared to other algorithms which replace the modified VNS by basic VNS, differential evolution and genetic algorithm. Computational results show that performance of our approach is powerful in terms of objective value, convergence speed and stability.

Research on Cross-Correlation, Co-Integration, and Causality Relationship between Civil Aviation Incident and Airline Capacity in China

Aviation incident is a crucial approach for accident prevention and safety improvement. It is of remarkable practical significance to clarify the relationship between aviation incidents and airline capacity. In the present study, time-series analysis methods, such as cross-correlation, co-integration, and causality analysis are employed to explore the longitudinal relationship between airline capacity (measured by flight hours) and aviation incidents in seven different categories in China from 1994 to 2020. The obtained results indicate the existence of a substantial positive correlation between the total number of incidents and flight hours in China’s civil aviation. Among the incidents with various categories, there exists a remarkably positive correlation between flight hours and incidents caused by environmental factors, ground support, and other factors. Additionally, the maximum degree of positive correlation is detected between incidents caused by environmental factors and flight hours. However, a negative correlation between flight hours and incidents caused by aircrew, air traffic control, and aircraft maintenance is carefully displayed and discussed. More investigations reveal that there would be no co-integration relationship between the total number of incidents and flight hours. Among the incidents with different categories, a co-integration relationship between the number of incidents caused by ground support and flight hours is also reported, demonstrating a long-term equilibrium relationship between them. There is no Granger causality between the total number of incidents and flight hours; nevertheless, there is a one-way Granger causality between flight hours and incidents resulting from ground support and environmental factors. It implies that the flight hours can be exploited to explain and predict the variations of these two categories of incidents. This study clarifies the relationship between incidents and airline capacity from a statistical point of view and provides a solid reference for policymakers to implement safety management.

Identifying the drivers of profitable airline growth

While regulatory changes in the global economic environment have facilitated airline capacity growth, profitability remains as a challenging issue for airlines globally. This study examines whether the airline business model has an impact on the tension between growth and profits and is the first to apply the dynamic system generalised method of moments model to this relationship. We find that full-service network carriers are faced with a trade-off between growth and operating profits, whereas low-cost carriers are able to simultaneously pursue growth-oriented strategies whilst improving profitability. We discuss the key differences in the business models that drive these results and expect that short-term effects of COVID-19 travel constraints will impact different airlines in distinct ways.

Airline Network Structure: Motifs and Airports’ Role in Cliques

The air transport system can be considered to be a complex network with airports as vertices and direct flights as edges. Research in this area contributes to the optimisation of the airline network and the sustainable development in transportation. This study chose Air China as an example to discover the dynamics of the airline network topologically. Serving as a critical agent of social and economic connections between cities, the airline network structure evolves over time. However, Air China maintains its multicentric and hierarchical structure and forms a mature point-to-point network with codeshare partners. This research also extracts key players at the airport level and investigates the topological structure of highly connected cliques. The results show that the combination of airports in the cliques may be affected by the airline capacity, traffic rights and interline cooperation. Meanwhile, smaller airports appear more often in cliques than hub airports, which can be interpreted and justified with slot limits at mega-airports. The weighted clique percolation method provides new insights to detecting overlapping communities, which can be characterized by geographical constraints. The shared vertices in the combined codeshare network indicate the possible hub shifting in the constantly changing aviation sector.

STUDY OF THE EFFICIENCY OF SPANISH AIRLINES: A NON-PARAMETRIC DATA ENVELOPMENT ANALYSIS

Spain is an eminently tourist country, which allows the creation of countless jobs and contributes greatly to GDP growth. Millions of people visit this country every year, and more than 80% do so through air transport. This paper studies whether the 13 Spanish airlines with the highest revenues in 2018 were efficient in that year, thus filling a gap in the tourism literature. For this purpose, the non-parametric DEA technique has been used, using as inputs the total number of workers in the company and the total number of seats available (airline capacity). Total revenue and number of passengers have been used as outputs. The results obtained show that all the airlines studied within the IAG group (Iberia, Vueling, Air Nostrum, Iberia Express) are efficient, in addition to the Canary Islands airlines (Binter Canarias, Canarias Airlines and Canary Fly) and Air Europa. Likewise, the reference airlines for the inefficient ones have been determined, which will have to reduce the number of workers or make changes in capacity in order to achieve greater income and be efficient.

Airline-within-Airline business model and strategy: case study of Qantas Group

The increase of the aviation industry in recent years has led to the expansion and integration of people and various cultures. Aviation is a consistently growing, especially in modern times. This study briefly reviews the literature regarding the Airline-within-Airline (AwA) business model and strategy. Bringing together the conceptual differences of business models, the main elements of this model were highlighted. The authors seek to provide insights into the AwA business model allows both airlines to operate efficiently with dual-brand strategy. An in-depth case study of airlines was conducted by two airlines \– Qantas Airways and Jetstar Airways \– that present AwA business strategy. Using comparison analysis, SWOT analysis, Business Model Canvas, Boston Consulting Group matrix, and Game theory, the main attributes of a successful approach for AwA business model were identified based on the Qantas Group. The framework of optimal strategy for the Airline-within-Airline business model presented was based on network, scheduling, pricing, distribution, and airline capacity.

The future of airports post COVID-19

COVID-19 pandemic has hit most sectors of the world and has led to many industries coming to a standstill. It has led to restrictions of movement and travel ban. As a result of these restrictions, transport sector especially in aviation has impacted badly.With the uncertainty of further impact of the current situation, there is a likelihood of the aviation business rebounding at a slower pace bringing V-shape and U-shape recovery as per analysis of economic impacts on civil aviation by International Civil Aviation Organization (ICAO (2020). Currently, airline capacity is down 70 to 80 percent in April 2020 compared to April 2019, and multiple large airlines have temporarily ceased operations. Largely, almost 60 percent of the global fleet was grounded in early April 2020 as per McKinsey report (Curley et al., 2020).In order to support the sinking capacities and revenues, the International Air Transport Association (IATA) calls on the European governments to provide relief to their airlines to sustain their operations. Furthermore, this document highlights the future of airport and air transport industry based on revenue generation sources, cost control strategies and integration of innovations with respect to variable demand and capacity during and post COVID-19.

The economics of Africa's floriculture air-cargo supply chain

This article examines the economics of Africa's emerging air cargo supply chains, taking floriculture as a case study. Floriculture is an important employer, and earner of foreign exchange for several regions of central/southern and eastern Africa including more recently Ethiopia. Air transportation often plays a critical role when the supply-chain involves high-value, non-durable, relatively light-weight, and compact consignments such as flowers, and geographically when regions are difficult to access by other trunk modes. The success of air cargo chains, however, depend as much on the quality of surface modes serving various “last mile” access and egress functions, as well as efficient nodal interchange points and the availability of suitable airport and airline capacity. The last, because of the important role of belly-hold space, includes consideration of passenger as well as cargo specific services. To meet the needs of Africa's floriculture sector, a variety of supply-chain models have emerged that embrace air and surface links, as well as storage at various points in the chain. The paper considers the nature of these chains, the reason d'être for their structures, and their limitations.

Antecedents of flight delays in the Australian domestic aviation market

Flight delays are widespread and growing around the world. Using public domain data of the airlines in Australia's domestic aviation market, this study investigates the antecedents of flight delays, and how airline operations contribute to such an important issue in the aviation industry. Applying the Hausman-Taylor regression method, the estimations suggest that the variables of the airline capacity decision are meaningful determinants of flight delays. Our findings inform that more frequent flights and larger aircraft are associated with more flight delays. A higher level of route congestion leads to more flight delays, especially for the low-cost carriers. Jet fuel price is identified as a driver, leading to more flight delays for the legacy airlines compared to the low-cost carriers. Keen competition between the airlines actually helps to improve the flight service quality, through fewer flight delays.

Regional airline capacity, tourism demand and housing prices: A case study of New Zealand

Tourism is one of the most important economic activities in New Zealand as tourists commonly travel by air to the various regions of this geographically isolated archipelago. This paper aims to investigate: (i) how regional tourism demand and airline capacity affect each other; and (ii) how both affect the housing prices in New Zealand's smaller regions. The paper empirically examines these inter-relationships between regional tourism demand and air transport, and their joint effects on the housing prices by constructing a three-stage least squares (3SLS) structural model employing a panel dataset of New Zealand's six smaller airports and regions from January 2008 to December 2014. Empirical results showed that increased regional tourism activity raises airline capacity and vice versa. Importantly, domestic airline capacity has a statistically significant impact on regional housing prices but not regional tourist demand (with the exception of Queenstown as a major and popular tourist centre). Policy implications of the key findings for regional tourism and air transport developments are discussed.

Airline capacity decisions under supply-demand equilibrium of Australia’s domestic aviation market

Australia is especially reliant on air transportation because of the geographical distribution of the urban centers across the country. This paper seeks to identify the antecedents of the capacity decisions of the airlines operating in Australian domestic aviation market. We examine the factors on both sides of the supply-demand equilibrium using monthly data of twenty-one major domestic routes linking eight major cities between January 2004 and December 2015. To investigate the relationship between flight demand and the variables of capacity decisions (flight frequency, aircraft size, load factor, and available seats), the pooled series cross-sectional data are analyzed using a two-stage least-squares method to model the supply-demand interaction. The results statistically differentiate the airlines’ strategies regarding capacity decisions for the short-haul, medium-haul, and long-haul routes. The results suggest that competition would lead to more flights, smaller aircraft size, lower load factors, and more available seats in all markets. Low-cost carriers play a key role in the short-haul market. Higher jet fuel prices scales up aircraft size on all flight routes. Notably, the socio-economic parameters of population and employment rates affect flight demand more strongly on the long-haul routes than other routes.

Airline capacity strategies: worldwide analysis, taxonomies and regional comparison

Airline capacity strategy is a crucial element of any airline operations management. However, there is no clear classification of airline capacity strategies, their taxonomies and how they differ across regions worldwide. Four stages methodology have been used: literature review content analysis, sample design, data collection/preparation and data analysis. Data for more than 350 airlines from six regions worldwide were collected, prepared and analysed. The K-means clustering test was used for this purpose. Five main airline capacity strategies were identified and taxonomised: low capacity-moderate destination; very-low capacity; moderate capacity-people focus; low capacity-onboard focus; and very-high capacity-selective countries strategies. In addition, main capacity strategy patterns within each region were identified too. Moreover, a cross regional comparison identifies the key features, similarities and differences between regions. Finally, some suggestions for airlines were given.

Airline capacity strategies: worldwide analysis, taxonomies and regional comparison

Airline capacity strategy is a crucial element of any airline operations management. However, there is no clear classification of airline capacity strategies, their taxonomies and how they differ a...

Airline capacity discipline in the U.S. domestic market

Using data from 1995 to 2016, this study examines airline capacity growth in the U.S. domestic market, and its impact on revenue. The results show that, after controlling for the strength of the economy and the price of fuel: (1) decreases in total domestic airline capacity are strongly correlated with increases in average domestic revenue per available seat mile (RASM); and (2) decreases in total domestic airline capacity are strongly correlated with increases in total domestic revenue. The results also show that using the real GDP growth rate as the focal point for capacity growth may help airlines maintain or slightly increase RASM over time.The data show that the average year-over-year domestic capacity increase during 2011–2015 was lower than in the past. Also, while individual airlines continue to add capacity at different rates, the variation between airlines is less than before industry consolidation.

Strategic Growth of Government-Owned Airlines in the Game of Competitive Advantage of MNEs & Nations

The purpose of this paper is to empirically confirm and theoretically explain the observation that government-owned airlines have significantly lifted their share of global airline capacity. What i...

A case study: The impact of low-cost carriers on inbound tourism of Saudi Arabia

This study investigates the impact of low-cost carriers (LCCs) on Saudi Arabia's tourism demand. It also provides an understanding of the relationship between air transport development and tourism development in the Gulf region. The Box–Jenkins SARIMA-X models were employed to model and forecast international tourist arrivals to Saudi Arabia, using monthly international tourist arrivals to Saudi Arabia from July 2010 to December 2015. The forecasting models were significantly accurate, with lower values of MAPE, MAP, and RMSE. The findings suggest that an increase in airline capacity, religious travel, and airline competition are associated with the increasing international tourist arrivals to Saudi Arabia. This also indicates that there is a positive relationship between air transport development and tourism development. Further aviation liberalisation in the Gulf region is discussed to give opportunities for the region's LCCs to increase their share of the increasing air travel demand, thereby enhancing tourism development.

“Now everyone can fly”? Scheduled airline services to secondary cities in Southeast Asia

Since the late 1990s, almost no world region has experienced faster air traffic growth than Southeast Asia. Much of that growth is attributable to new low-cost carriers (LCCs), which collectively accounted for nearly half of scheduled airline capacity on routes from Southeast Asian cities in 2013. Yet despite the expansion of traffic and the proliferation of carriers, airline traffic remains strongly concentrated in the key hubs of Bangkok, Singapore, Jakarta, Kuala Lumpur, Ho Chi Minh City, and Manila. Similarly, trunk routes, defined as sectors with more than 0.01 percent of global airline capacity, continue to account for 54 percent of all seat capacity in the region. LCCs have helped to perpetuate these imbalances as budget airlines like AirAsia have disproportionately favored already well-served markets. Such patterns are important because aviation plays an outsized role in Southeast Asian intercity transportation and in its economic development. The analyses reported here indicate that while the growth of aviation since the late 1990s has been impressive, that growth so far has not done much to improve Southeast Asia's entrenched patterns of spatial inequality.

An Empirical Investigation into the Effect of Enhancing Airline Capacity on Load Factor: A Case of Kenya’s Low-Cost Carriers

This paper reports the findings of an empirical study on the low-cost airline market. A lot of literatures on low-cost carriers’ business model agree that low-cost airlines operate with high load factors. However, due to variations in the market development life cycle of low-cost carriers from one region to another, empirical evidences have shown mixed results of the effect of increasing airline capacity on load factor. The paper therefore extends this analysis by examining two airlines in Kenya over 72 months period; and explores such impact using panel data to capture both time-series and cross-sectional elements over the period. Findings indicate that fleet capacity is a significant positive predictor of load factor. The paper finally underlines that increasing capacity by 1 seat will result in an increase of 0.03% in load factor.