Airline Market Share Research Articles

Competition on the UK-Australasia market: Evidence from transaction data

Using the sample of actual purchased tickets, obtained from Skyscanner, we estimate the relationship between market concentration and airfares on a sample of the UK-Asia and UK-Australasia markets. We find significant positive relationship between market concentration and price. Moreover, the magnitude of the effect is similar to what has been reported in the literature for markets in other parts of the world. The relationship between the airline's market share and price suggests that the markets we are studying are subject to more intense competition as compared to what has been reported in the literature for more mature airline markets.

The Impact of Airport Managerial Type and Airline Market Share on Airport Efficiency

This paper investigates the impact of airport managerial type and airline market structure on airport efficiency. It explores whether the market shares of the largest airlines differ depending on the managerial type of the airport. In this study, the efficiency scores for the sample airport are measured through DEA (Data Envelop Analysis), and the impacts of the airport managerial type and dominant carrier market share on airport efficiency are subsequently estimated through CEM (Coarsened Exact Matching). This paper concludes that group airports are more efficient than the standalone airports, and the market shares of the largest airlines have a positive impact on enhancing airport efficiency. In addition, the market shares of the largest airlines are found to be higher for group airports than for standalone airports. These findings can serve as practical guidelines for governments and airport authorities by suggesting that efficiency improves when multiple standalone airports are operated as a group through the M&A of airports or the establishment of airport operation agencies. While facing unprecedented challenges from the spread of COVID 19, this paper also suggests that an increase in airline market share through airport–airline cooperation has a positive impact on airport efficiency.

Simulating Airline Behavior: Application for the Australian Domestic Market

This paper demonstrates the ability of a model, which simulates competition between airlines in a domestic aviation market, to accurately reproduce real-world behavior. The Australian market was chosen as a test case as it is a geographically isolated region with significant demand and complexity, including one of the busiest routes in the world, where connecting international passengers do not significantly skew the market. The model is based on an n-player noncooperative game, in which each airline represents a player within the game. The primary assumption is that each airline attempts to maximize profits by adjusting the decision variables of airfares, flight frequency, and choice of aircraft on routes within its network. The approach works iteratively, allowing each airline to respond to the decisions made by other airlines during each successive optimization. The model is said to reach convergence when there is no significant change in any airline’s profit from one iteration to the next. Once this occurs, the predictions of each airline’s decision variables can be compared with real data. The model gives highly detailed predictions of airline specific airfares, flight frequencies on segments, passenger flows, and airline market share, which strongly correlate with observed values.

Evaluation of quality with risk assessment using Kano model and FMEA in Indonesia airline services

Competition in the airline industry has increased this triggers the development of low cost carrier. One airline that has felt the impact of this increased competition is the airline Garuda Indonesia, which previously controlled the airline market share in Indonesia before the emergence of low cost carrier. Garuda Indonesia airline as a market leader still need to improve their services because the satisfaction of some customers is not as high as Garuda Indonesia expected. Based on preliminary studies conducted, there are still customers who feel not satisfied with the services provided by the Garuda Indonesia airline. To maintain the number of customers and increase the number of customers using Garuda Indonesia flight services, Garuda Indonesia airlines must evaluate the quality of service and improve the quality of services provided. This study aims to evaluate the quality of service on airlines using the Kano model and perform quality risk calculations on airline service using Failure Mode and Effects Analysis (FMEA) method. By using KANO Model and Failure Mode and Effect Analysis (FMEA), there are 8 service attributes that need to be improved by Garuda Indonesia Airlines. The service attributes include the ease of check-in and waiting time, the time of departure and the arrival of the aircraft, the suitability of the number and the flight schedule, the flight safety, safety standard, the ticket price compared to the competitors, the suitability of the ticket price with the services provided, compensation in case of loss or damage to the luggage and the quality of the dish / snack served during the flight. These attributes need to be upgraded by Garuda Indonesia airlines to increase customer satisfaction so customers will reuse.

Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry

Institutions often own equity in multiple firms that compete in the same product market. These institutional owners may induce or mandate anti-competitive pricing behavior among product market rivals. This paper evaluates prior evidence of such behavior between competing airlines. The measure of common ownership used is a function of each airline's market share, as well as the control and cash flow rights held by the institutions that own the airlines that compete in the same market. We show that the documented positive correlation between common ownership and ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We examine other econometric and data measurement issues and show that the previously documented results are sensitive to alternative measures of investor control, as well as alternative assumptions about equity holders' ownership and control during bankruptcy.

Data-Driven Frequency-Based Airline Profit Maximization

Although numerous traditional models predict market share and demand along airline routes, the prediction of existing models is not precise enough, and to the best of our knowledge, there is no use of data mining--based forecasting techniques for improving airline profitability. We propose the maximizing airline profits (MAP) architecture designed to help airlines and make two key contributions in airline market share and route demand prediction and prediction-based airline profit optimization. Compared to past methods used to forecast market share and demand along airline routes, we introduce a novel ensemble forecasting (MAP-EF) approach considering two new classes of features: (i) features derived from clusters of similar routes and (ii) features based on equilibrium pricing. We show that MAP-EF achieves much better Pearson correlation coefficients (greater than 0.95 vs. 0.82 for market share, 0.98 vs. 0.77 for demand) and R 2 -values compared to three state-of-the-art works for forecasting market share and demand while showing much lower variance. Using the results of MAP-EF, we develop MAP--bilevel branch and bound (MAP-BBB) and MAP-greedy (MAP-G) algorithms to optimally allocate flight frequencies over multiple routes to maximize an airline’s profit. We also study two extensions of the profit maximization problem considering frequency constraints and long-term profits. Furthermore, we develop algorithms for computing Nash equilibrium frequencies when there are multiple strategic airlines. Experimental results show that airlines can increase profits by a significant margin. All experiments were conducted with data aggregated from four sources: the U.S. Bureau of Transportation Statistics (BTS), the U.S. Bureau of Economic Analysis (BEA), the National Transportation Safety Board (NTSB), and the U.S. Census Bureau (CB).

How Does Competition Affect Product Choices? An Empirical Analysis of the U.S. Airline Industry

This paper studies major airlines' choice of whether or not to outsource operations to regional airlines across routes and over time. Using panel data of the U.S. airline industry, we find significant differences on the pattern of outsourcing to regional airlines depending on whether the major airlines operate their own major fleets on the route as well. Our results suggest that if HHI increases by 0:1, the log likelihood of a major airline choosing complete outsourcing relative to no outsourcing, goes up by 3.3%. This log likelihood goes down by 5.8% if the major airline's market share increases by 0.1. In contrast, the log likelihood of partial outsourcing relative to no outsourcing goes down by 16.7% if HHI goes up by 0.1, and goes up by 17.8% if the major airline's market share goes up by 0.1. Taking into account the ownership of regional airlines, we find that when facing more LCC competition, major airlines are more likely to rely on wholly owned subsidiaries relative to independent regional airlines. This lends support to the commonly held view that major airlines rely on regional airlines to compete with LCCs. We also investigate how major airlines adjust their prices when facing either LCC entry threat or actual entry. For carrier-routes with no outsourcing, we find that major airlines do not respond in prices to either threat of or actual LCC entry. In contrast, on carrier-routes with partial outsourcing, major airlines lower their prices by about 5.2% one quarter after LCC entry, with no adjustments in other periods.

Benchmarking the service quality of airlines in the United States: an exploratory analysis

Purpose– The purpose of this paper is to help airlines gain a better understanding of passengers’ service concerns, identify opportunities for continuous service improvement, and then develop service benchmarking standards that can be a yardstick for the airline’s competitiveness.Design/methodology/approach– This paper develops a set of target performance standards that helps airlines monitor their service delivery process, identify relative weaknesses, and take corrective actions for continuous service improvements using exploratory data analysis and competitive gap analysis.Findings– This study reveals that a service attribute considered most important to the airline customers’ impressions of service quality are air safety. This result reflects a growing concern over potential terrorism against airlines in the wake of the September 11 incident. The authors also found that proper baggage handling, competitive airfare, and on-time arrival/departure were next most important service attributes, whereas frequent flier and code-sharing programs were least important. Furthermore, the authors discovered that airline passengers’ perceived service quality influenced their choice of airlines. That is to say, airline service quality can be an important gauge of airline market share and revenue.Research limitations/implications– The current study is limited to the evaluation of comparative service quality of airlines in the USA. Thus, this study cannot be generalized to the airline passengers’ perceived service quality in other countries or different cultural settings. Also, this paper focuses on the performance aspect of benchmarking rather than the strategic aspect of benchmarking.Practical implications– With rising costs of fuel, labor, maintenance, and security, many airlines are at a crossroads where they have to decide between succumbing to restructuring pressures in a form of mergers/acquisitions and reinventing their service offerings. One viable means of reinventing airline service offerings is to learn more about what airline passengers truly value and appreciate in terms of service offerings and then figure out what it takes to win the hearts of customers and then how the airline can differentiate its service offering from those of its competitors. With this in mind, this paper develops viable service improvement strategies for the airline that can enhance its competitiveness in the struggling airline industry.Originality/value– This paper is one of a few attempts to identify a list of service attributes most important to airline service quality based on the actual survey of airline passengers, and then develop a benchmark standard of airlines in the USA from a customer (passenger) perspective.

Market Share Modeling in Airline Industry: An Emerging Market Economies Application

For an airline, the ability to accurately predict market share of its competitors at specific airports could be crucial for an efficiently tailored business strategy. The model developed in this paper deals with the issue of airline market share at specific airport. Several explanatory variables, such as: number of competitors, frequency of flying, membership to specific alliances etc., have been considered by the model. Traditional techniques and fuzzy logic have been applied to estimate the model. The model is illustrated with real data and is applicable to demonstrate how it could be used for calculating an airline's market share.

Revenue management for the optimal control of group traffic

The effective management of group traffic is required to minimize revenue dilution and enhance an airline's market share. Group management is challenging from several perspectives – process, decision support and reservation system workflow for the management of group blocks. This article discusses the various types of groups and the airline business model to manage group revenue.

Effect of Disruptions on Service Quality and Market Share

The purpose of this study was to investigate the effect of disruptions on service quality and market share in the U.S. domestic airline industry. Structural equation modeling was used to empirically test the effect of disruptions on service quality and market share for the network and low-cost airlines. The findings suggested that network airlines could manage disruptions more effectively than low-cost airlines. Although disruptions had a negative effect on service quality for both network and low-cost airlines, their effect on airline market share was different. Disruptions had a significant (negative) effect on market share for the low-cost airlines, whereas they did appear to affect market share for the network airlines. Multigroup analysis of invariance was used to compare the effect of disruptions on service quality and market share between airlines. The analysis showed that the effect of disruptions on service quality and market share was different between airlines. On the basis of the findings of this study, recommendations for managers in the airline industry are provided.

Agent-based analysis and simulation of the consumer airline market share for Frontier Airlines

The complex and interconnected world in which organizations operate presents many challenges to the traditional neo-classical view of research and management and associated research techniques. Fundamental to the operation of financial capital markets, investor confidence relies on accurate investment analyst earnings forecasts. We propose agent-based modeling (ABM) as a viable tool to account for the interaction of local and environmental factors to determine organizational success. In an illustrative case study of Frontier Airlines, we develop and execute an ABM of Frontier’s consumer airline market to derive market share for the upcoming year. In the model, Frontier is impacted by internal policies, competitors, and environmental factors of fuel costs, federal regulation, and credit availability. We conclude with a discussion on how ABM can be effectively incorporated into future research activities and decision-making situations.

Risk Aversion to Short Connections in Airline Itinerary Choice

Network airlines traditionally attempt to minimize passenger connecting times at hub airports, assuming that passengers prefer minimum scheduled elapsed times for their trips. However, minimizing connecting times creates schedule peaks at hub airports. These peaks are extremely cost-intensive in terms of additional personnel, resources, runway capacity, and schedule recovery. Consequently, passenger connecting times should be minimized only if the anticipated revenue gain of minimizing passenger connecting times is larger than the increase in operating cost (i.e., if this policy increases overall operating profit). The extent to which a change in elapsed time affects passenger itinerary choice—and thus an airline's market share—is analyzed. An existing airline itinerary choice survey is extended to test the assumption that passenger demand is affected by the length of connecting times. Previous studies have not explicitly focused on the connecting time at hubs in their models. The hypothesis is that passe...

Risk Aversion to Short Connections in Airline Itinerary Choice

Network airlines traditionally attempt to minimize passenger connecting times at hub airports, assuming that passengers prefer minimum scheduled elapsed times for their trips. However, minimizing connecting times creates schedule peaks at hub airports. These peaks are extremely cost-intensive in terms of additional personnel, resources, runway capacity, and schedule recovery. Consequently, passenger connecting times should be minimized only if the anticipated revenue gain of minimizing passenger connecting times is larger than the increase in operating cost (i.e., if this policy increases overall operating profit). The extent to which a change in elapsed time affects passenger itinerary choice–-and thus an airline's market share–-is analyzed. An existing airline itinerary choice survey is extended to test the assumption that passenger demand is affected by the length of connecting times. Previous studies have not explicitly focused on the connecting time at hubs in their models. The hypothesis is that passengers might incur lower utilities from shorter connecting time versus longer connecting times based on the potential discomfort of a hasty connection and the misconnection risk associated with short connecting times. A stated preference experiment is performed, and socioeconomic data are collected to estimate a choice model. Multinomial logit model results support this hypothesis and refute the traditional network airline assumption.

Appropriating Value from Computerized Reservation System Ownership in the Airline Industry

It is difficult for the firm competing through information technology resources to gain a sustainable advantage because systems are easy to imitate and substitute resources are often available to competitors. The innovator may be unable to appropriate all of the benefits from information technology investments. Airlines have installed computerized reservations systems in travel agencies to appropriate the returns from their investments in information technology. The airlines expected to obtain a number of benefits from this strategy, including increased efficiency, possible bias in favor of the computerized reservations systems owner on the part of the travel agent, and fees from other airlines for making reservations for them. The purpose of this paper is to evaluate the appropriation of value by computerized reservations systems owners from deploying systems in travel agencies. These benefits, beyond fees from travel agents, should be seen in the vendor airline's market share between cities and in the overall performance of the airline at an industry level. This paper models airline performance as a function of computerized reservations systems ownership at two levels: for selected city-pairs and at the overall level of the firm. The city-pair analysis employs a multinomial logit market share model that analyzes five years of data on 72 city-pair routes. The industry model uses longitudinal data for a panel of 10 airlines for 12 years. The results of both analyses support hypotheses that computerized reservations systems ownership is positively related to airline performance. It appears that strong airlines have appropriated the benefits of their computerized reservations systems, turning them into highly specialized assets for further travel-related innovation. This work offers useful theoretical extensions and methodological approaches for the study of similar kinds of network technology innovations that are currently being deployed in association with electronic commerce on the Internet.

Airline market share and customer service quality: a reference-dependent model

Traditional models that explain the nature of the relationship between customer service quality and airline demand assume that the relationship can be approximated by using smooth or differentiable curves. Suzuki and Tyworth, however, recently argued that this assumption may not be valid, and that, if it is invalid, the model performance can be improved by using non-smooth functions to represent the relationship (Suzuki, Y., Tyworth, J.E., 1998. A theoretical framework for modeling sales-service relationships in the transportation industry. Transportation Research E 34 (2), 87–100). We use their framework to develop a model that represents the relationship between service quality and market share in the airline industry and then empirically compare its performance with conventional airline demand models. The results indicate that the relationship is characterized by a non-smooth curve and that our model provides a significantly better goodness of fit than other conventional demand models.

The relationship between on-time performance and airline market share: a new approach

We propose a new method of modeling the relationship between on-time performance and market share in the airline industry. The idea behind the method is that the passengers’ decision to remain (use same airline) or switch (use other airlines) at time t depends on whether they have experienced flight delays at time t−1 or not. More specifically, we posit that the passengers who experienced flight delays are more likely to switch airlines for the subsequent flight than those passengers who did not experience delays. To capture such effect, we develop an aggregate-level Markovian type model that estimates the transition probability matrices separately for the passengers who experienced flight delays at time t−1 and for those who did not experience delays. The model was calibrated with the US DOT data. The study results imply that, once experiencing flight delays, passengers are more likely to switch airlines. The results also imply that on-time performance affects a carrier’s market share primarily through the passengers’ experience, and not though the “advertisement” of performance.

Editorial collaborators

For an airline, the ability to accurately predict market share of its competitors at specific airports could be crucial for an efficiently tailored business strategy. The model developed in this paper deals with the issue of airline market share at specific airport. Several explanatory variables, such as: number of competitors, frequency of flying, membership to specific alliances etc., have been considered by the model. Traditional techniques and fuzzy logic have been applied to estimate the model. The model is illustrated with real data and is applicable to demonstrate how it could be used for calculating an airline's market share.

Access, Fares, Frequency: Effects on Airport Traffic

The effects of airport access, and of airline fares and frequency, on the number of passengers using an airport are examined through a case study of the Texas intrastate air market. During the early 1970's, when Southwest Airlines engaged in fierce competition with other carriers and when Dallas/Fort Worth airport opened, major changes occurred in one factor while others remained constant. This context provides several special, quasi-experimental, situations which make it possible to identify the effects of each factor. The analysis confirms that: (1)Airport access can have an important impact on short haul air travel (the move by most carriers from close-in Dallas/Love to the more distant Dallas/Fort Worth airport led to a drop of about 12% in this traffic); (2)the fare elasticity is approximately one for this domestic traffic; and (3)relative frequency of flights is an important determinant of an airline's market share, according to an S-shaped relationship, except when significant price and locational factors intervene and dominate this phenomenon.