Airline Competition Research Articles

Price and demand behaviors in the Scandinavian airline industry following market liberalization

This paper examines the airline competition after liberalization through an empirical specification of a demand and pricing equation system. The system is estimated for the Scandinavian (Denmark, Norway, and Sweden) domestic airline market using a simultaneous-equations procedure. The purpose of this study is to gather the various reactions of the industry players and determine whether the competition model after liberalization, by studying routes covering 95% of these types of connections operated in this market. This study focuses on the mobility of same-day business travel passengers. This model, based on over 161 routes and over 56 fortnights from 2013 to 2015, allowed for the creation of a data panel intended to show whether or not the pattern of behavior in this market can be explained by the main oligopoly models. By estimating elasticities and analyzing behaviors in the airline market, this research can be helpful to transport authorities and airlines.

Factors Influencing Competitive Pricing for Airlines in Malaysia

The purpose of this study is to determine the factors that influenced competitive pricing for airlines in Malaysia. A particular route, Kuala Lumpur to Singapore has been selected as the case study whilst observing a comparison of competitive pricing between full service and low cost carriers. This research was derived in response of World’s Busiest International Air Routes report from OAG Aviation Worldwide that shows more than 30,000 flights frequency on average in both directions for international route Kuala Lumpur to Singapore on an annual basis. This study will try to explore the influence in competitive pricing between forecast on demand and product quality. A framework model has been proposed to determine the factors on competitive airlines pricing in Malaysia. The outcome of this study is to assist airlines to develop an effective approach for competitive pricing for passengers to choose their desired air carrier for short haul flight sectors.

Features of the legal regulation of the competitiveness of airlines on domestic flights of the Russian Federation

Features of the legal regulation of the competitiveness of airlines on domestic flights of the Russian Federation

Political Economy of ASEAN Open Skies Policy: Business Preferences, Competition and Commitment to Economic Integration

Despite significant growth of the domestic airline industry, Indonesia was hesitant to ratify the ASEAN Open Skies Policy (OSP) until 2016. One of the recent findings exposed the increasing concern over foreign–domestic airline competition with too little attention in exploring airline aspirations and the potential interplay between the airline preferences and the state interest. This study empirically investigates the dynamics of domestic resistance to the implementation of OSP, and to what extent the interplay of Indonesian airlines’ business preferences, ASEAN contexts and state interests have contributed to the OSP ratification postponement. Taking some lessons from the OSP ratification, we argue that the efforts towards advancing ASEAN economic integration through the open skies are contested domestically when business preferences showed mixed reactions. There has been little agreement on how the OSP could benefit the domestic airlines following their own business strategy. In the meantime, state principles indicated certain priorities for domestic interests, while ASEAN contexts allowed a member state to practice a negotiated move. The study was conducted using a qualitative method, with semi-structured interviews involving three Indonesian airlines (state and privately owned, full service and budget airlines), government officials, a civil society element and the Indonesian national air carriers association. JEL Classification: F0, F5

객실승무원의 보상만족이 경력만족, 경력몰입에 미치는 영향

With the recent increase in the number of low cast carriers, service competition among domestic airlines has been intensified. The airline industry is a representative industry of human services. In particular, since airline cabin service is an important factor in determining the images and competitiveness of airlines, human resource management plans to efficiently manage cabin crews who firsthand attend customers are required. Accordingly, the purpose of this study is to examine the influencing relationships among compensation for career cabin crews, their career satisfaction, and their career commitment, and present human resource management plans for airlines. According to the results of analysis, first, airline cabin crews’ compensation satisfaction had significant effects on their career satisfaction. Second, among the factors of airline cabin crews’ compensation satisfaction, only wage compensation and procedure compensation had significant effects on career commitment. Third, airline cabin crews’ career satisfaction had significant effects on their career commitment, and played a partially mediating role in the relationship between airline cabin crews’ compensation satisfaction and career commitment. Based on the findings of this study, it is considered that airlines should be aware of the fact that compensation for cabin crews provided by airlines leads to cabin crews’ further commitment to their work through satisfaction with the work carried out by them and their profession and that if cabin crews are encouraged and efficiently managed through appropriate compensation when airlines’ goals have been achieved, the airlines’ competitiveness will be enhanced further.

A Study on Determining Factors Influence Pricing Competitive for Airlines in Malaysia

The purpose of this study is to determine the factors influence pricing competitive dynamic airlines by passenger for the specific routes of Kuala Lumpur to Singapore between the Prime Carrier and Low-Cost Carrier. This research was derived in response of World’s Busiest International Air Routes report from OAG Aviation Worldwide that shows more than 30,000 flights frequency in both directions for international route Kuala Lumpur to Singapore during 12 months in 2018. This study will be understanding the influence in pricing competitive between forecast on demand, and product quality. A framework model has been proposed to determine the factors on competitive airlines pricing in Malaysia and the variables are Market Segmentation, Product Quality and Demand Forecast. This research used a quantitative data collection method to gather or to prompt information from respondents, in this case passenger who is using flights from Kuala Lumpur to Singapore. A total of 424 passengers was sampled and the set of questionnaires were distributed using the non- probability sampling technique which is convenience sampling to obtain sample data to be analyzed. The analysis in this study was conducted using descriptive statistical analysis tools. – SPSS – version 23. Results from the multiple analysis demonstrate that product quality and demand forecast as factors influencing pricing competitive.

Image congruity as a tool for traveler retention: a comparative analysis on South Korean full-service and low-cost airlines

ABSTRACT Retaining customers is irrefutably one of the top priorities in the increasingly competitive airline marketplace in South Korea. This research was an empirical endeavor to better comprehend the role of image congruence, attitude, confidence, and love in building airline customers’ repeat patronage intention by considering the moderating impact of airline type. Our result demonstrated the significant role of these constructs in determining intention. In addition, airline type had a significant effect. Moving one step further than the extant literature, this study successfully developed a meaningful conceptual framework offering a clear understanding of the convoluted customer post-purchase decision formation.

A binary differential evolution algorithm for airline revenue management: a case study

In the current highly competitive airline market, many companies have failed due to their low revenue rates. For this reason, many of them have to develop strategies to increase their revenue. In this study, we develop revenue management (RM) strategy for the Iranian airline industry. More specifically, we present a mathematical model that considers some conditions not studied in previous research in order to provide a more realistic RM modeling of airlines that fits well for the special characteristics of Iranian Airways. A binary differential evolution algorithm is employed to solve the model due to the stochastic nature of data and the NP-hardness of the considered problem. To generate maximum revenue among the six types of airplanes that fly the four capital cities of Iran, the airline under investigation is advised to operate only 21 flights to those cities and cancel the rest of the flights.

Evaluación de la competitividad de las aerolíneas en base al método de clasificación multicriterio.

El artículo presenta los resultados de una revisión crítica de la literatura científica nacional y extranjera sobre la evaluación de la competitividad de las aerolíneas. Se proponen recomendaciones científicas y metodológicas para evaluar esta competitividad en la Federación Rusa, utilizando herramientas matemáticas de análisis de conglomerados y clasificación de criterios múltiples. El artículo analiza la estructura de divisiones y ligas de la aerolínea. Se propone formar tres ligas de aerolíneas (pasajeros, carga y mixtas) y cinco divisiones. La evaluación de la competitividad de las aerolíneas nacionales se ofrece en cuatro etapas. En conclusión, se compiló la matriz "tamaño - carga de la flota de aerolíneas". Se presentan resultados de la aprobación práctica de la tarea de evaluar la competitividad de ciertas aerolíneas.

Revenue management games with government mandate

In 2007, the Chinese aviation authority asked the five airlines that offer service between Shanghai and Beijing to form an express shuttle alliance so that tickets from one airline could be used for any flight offered by any of the other airlines. In this paper, we study the impact of such a government mandate on the competitiveness of the market and on airline operations. First we extend a competitive airline seat allocation model to include such a government mandate and provide sufficient conditions for the existence of a pure-strategy Nash equilibrium in such a model. Both our analytical and numerical results show that fewer low-fare seats would be made available in a market with the government mandate, and furthermore, revenues of individual airlines would be lower as well. We then study a seat inventory and price competition game between duopoly airlines with the government mandate and establish the existence of pure-strategy Nash equilibriums. We show that with the government mandate, the airlines would reserve more high-fare seats and raise the prices of high-fare seats. In addition, we show that the revenues of the airlines would decrease as fewer low-fare seats are offered and increase as the prices of high-fare seats are increased. We also discuss how the government mandate should be designed so that the market could operate as efficiently as possible.

Modeling Airlines’ Route Selection Decisions Under Competition: A Discrete-Games-Based Model

To analyze the effects of policies within the air transportation network, there is a need to model how policies affect the decisions made by airlines. Because airline decision making is based on proprietary information, such models need to rely on openly available data sources. In this paper, openly available data from the Bureau of Transportation Statistics are used to develop a predictive model of airline route selection decisions. The proposed model accounts for airline competition and models parameters such as operating cost, which can be influenced by policymakers. This paper illustrates the model using a dataset from two major airlines in U.S. domestic air transportation network. The dataset and the cost model are used for Bayesian estimation of model parameters, which are then used to predict the effects of cost and demand on the evolution of the network topology. The proposed model is found to be more accurate than competing models that do not consider the competition. From the estimates obtained on preference parameters, it is found that decreasing the operating cost and increasing the market demand increase the probability of operating service on the route for airlines, and the operating cost has a greater effect than market demand and route distance on the route selection decisions.

감각유산이 러브마크, 트랜스포메이션 및 고객지향성에 미치는 연구: 항공사 특화서비스를 중심으로

Today many airlines in the highly competitive airline industry seek after a strategy of fragmented high-end service and differentiation to take a new move to emphasize emotional and experiential elements, thus increasing airline event activities. The purposes of this study were to empirically analyze the influential relations of customer orientation, transformation, and components of lovemarks as well as the sense heritage of specialized airline services based on concerned previous studies. The results were summarized as follows: First of all, the sense heritage of the A airline had meaningful effects on lovemarks. Second, the greater its five lovemarks were the more influences they had on transformation. Third, the higher the perceptions of its lovemarks were, the more effects they had on customer orientation. Lastly, the greater transformation the cabin crew of the A airline showed, the more meaningful impacts it had on customer orientation. However, The South Korean Airlines have limited research on the cabin crew compared with overseas counterparts and need to do something more active research on them.

Joint optimization of pricing and capacity allocation for two competitive airlines under demand uncertainty

Joint optimization of pricing and capacity allocation for two competitive airlines under demand uncertainty

Theory of product policy and practices in airlines

Pricing and product policy in the airline industry is very complex and different from other industries, thus a successful airline has to manage its products and pricing perfectly, otherwise it will not succeed on the extremely competitive airlines market. This paper has two main goals, firstly to generally define product policy and secondly to show the product policy of airlines. Currently, airlines operate in a very competitive industry with little to no option to differentiate their product which leads to low profitability. New Distribution Capability and another new technology have the potential to increase airlines’ revenue by better price discrimination and more personalization.

Competition and Sustainability Development of a Multi-Airport Region: A Case Study of the Guangdong–Hong Kong–Macao Greater Bay Area

A new era in the development of multi-airport regions (MARs) has been in China, especially in the construction of global urban areas such as the Guangdong–Hong Kong–Macao Greater Bay Area (GBA). In order to better understand competition and provide significant advice to support sustainable development of Chinese MARs, this paper takes the GBA-MAR as an example, and then explores the competition between airports in this multi-airport region based on route level and its impact on passenger airport choice using three liner models. According to our findings, competition is concentrated on a few air routes in the Northeast–East Coastal region and the Asia-Pacific region, in which all three airports operate. Although the domestic market of the GBA-MAR has been relatively mature, the international air transport market is still left with considerable room, which is also reflected in connections to the world’s cities and tourist destinations. In addition, the research also found that different airport brands created by route type significantly affected passenger airport choice. Overall, the study revealed that whether from a supply or demand aspect, competition between airports in a multi-airport region—not just airline competition in a single airport—is an important topic.

항공사 객실승무원이 지각하는 성과주의 문화가 조직냉소주의와 조직시민행동에 미치는 영향 : 가족탄력성의 조절효과

This study was aimed at examining the relationship between performance-based culture and organizational cynicism that airline cabin crews perceive, as well as the effects of organizational cynicism on organizational citizenship behavior, and finally deducing the moderating variables that can adjust the relationship between these two variables. As the result of empirical analysis, it was found that the management of goals on the basis of performances lowered the organizational cynicism and the performance-based evaluation system increased organizational cynicism, through which decisions for performance-based promotion were not statistically significant. In addition, higher levels of organizational cynicism reduced organizational citizenship behavior, and family resilience was found to play the mediating role between these two variables. Accordingly, in order to increase the quality of service and competitiveness of airlines, there is a need to manage the organizational cynicism and organizational citizenship behavior of cabin crews through improvement as a proper performance-based culture. In addition, through the disclosure that family resilience is an important factor that imparts affirmative effects on organizational citizenship behavior by reducing organizational cynicism, it has been discerned that airlines need to develop a wider range of means of enhancing family consultation services and family resilience.

항공사 서비스품질이 서비스만족, 항공사이미지에 미치는 영향 : 국적항공사의 국제선 이용승객 대상으로

This study was designed to identify the relationship between the service quality of airlines(human and physical service quality, and systemic service quality) on the satisfaction of the service and the image of airlines on national airlines. The purpose of the study is to present strategic implications for the differentiated and competitive airline's service policies to provide the basic information necessary to establish strategies for international flights by national airlines and to improve ongoing customer maintenance. As a result of the analysis, first of all, the impact of the airline's international service quality and service satisfaction on the airline's international flights was having a positive influence. They also tend to be consistent with previous research results. Second, the existing research results are consistent with the existing research results, as both the satisfaction of the international service of the nationality airline and its impact on the airline's image are also affected. Third, the existing research results are consistent with the existing research results, as the quality of service of the international airline of the nationality airline and its relationship with the airline's image are affected. These results suggest that the human service quality, systemic service quality, and material service quality of the airline should be recognized as the top priority in order to secure loyal customers through satisfaction of the service. It also suggests that national airlines alone need differentiated and competitive service marketing to generate profits on international routes.

Balancing competition and cooperation: Evidence from transatlantic airline markets

In the last two decades, airline alliances were not only successful in extending the size of their networks, but also received approvals by public authorities to intensify their cooperation up to merger-like revenue-sharing joint ventures (JVs). We empirically investigate the impact of the implementation of such joint ventures on both the respective airlines’ network structure and their productive efficiency. Using U.S. DOT T100 International Segment data and applying airline-market fixed effects models, we find that joint ventures – compared to services with a lower degree of cooperation – lead to a 3–5 percent increase in seat capacity between the respective partner airlines’ hub airports; however, this is done at the expense of services elsewhere in the network. Productive efficiency, as measured by load factors, is found to be 0.5–5 percent lower for joint venture routes compared to routes operated under antitrust immunity only. We use our empirical results to discuss implications for the balancing of competition and cooperation in transatlantic airline markets.

Modeling the effects of airline slot hoarding behavior under the grandfather rights with use-it-or-lose-it rule

The prevalent airport slot policy, based on the grandfather rights and use-it-or-lose-it rule, may induce the so-called slot hoarding behavior, i.e., airline intentionally operates excessive or even unprofitable flights. This paper develops a vertical-structured model to explore the effects of such slot policy on airline’s service decisions (flight frequency, aircraft size and airfare) and airline profit, and the resultant implications for a profit-maximizing airport or a welfare-maximizing airport. The effects of airline competition on slot hoarding behavior are also examined with an oligopoly competition model in which the carriers provide horizontally differentiated flight services. Analytical solutions are derived and compared with the “no slot policy” scenario. We find that the claimed negative effects of the slot policy on airport congestion may be overstated since an airline chooses to hoard slots if and only if the demand/capacity ratio is significantly low. When the airline has to hoard slots by operating excessive flights, it would use smaller aircraft, charge a higher airfare and serve more passengers. For a private airport, the slot policy may increase the airport’s profit by allowing the airport to transfer some of the negative effects of weak travel demand to airlines. For a public airport, the slot policy does not decrease social welfare unless passengers’ valuation toward frequency benefit is low. Finally, for airlines with equal access to airport slots, as the substitutability among airlines and/or the number of competing airlines increases, the incentive of slot hoarding decreases. Hence, regulators may expect a much milder negative effect of slot hoarding in a competitive aviation market.

Measuring service quality from unstructured data: A topic modeling application on airline passengers’ online reviews

Service quality is a multi-dimensional construct which is not accurately measured by aspects deriving from numerical ratings and their associated weights. Extant literature in the expert and intelligent systems examines this issue by relying mainly on such constrained information sets. In this study, we utilize online reviews to show the information gains from the consideration of factors identified from topic modeling of unstructured data which provide a flexible extension to numerical scores to understand customer satisfaction and subsequently service quality. When numerical and textual features are combined, the explained variation in overall satisfaction improves significantly. We further present how such information can be of value for firms for corporate strategy decision-making when incorporated in an expert system that acts as a tool to perform market analysis and assess their competitive performance. We apply our methodology on airline passengers’ online reviews using Structural Topic Models (STM), a recent probabilistic extension to Latent Dirichlet Allocation (LDA) that allows the incorporation of document level covariates. This innovation allows us to capture dominant drivers of satisfaction along with their dynamics and interdependencies. Results unveil the orthogonality of the low-cost aspect of airline competition when all other service quality dimensions are considered, thus explaining the success of low-cost carriers in the airline market.