Airport Market Research Articles

New players on the airport market: How can the Solidarity Transport Hub affect global air traffic?

This paper analyses the concept of creating a new airport in Poland, the Solidarity Transport Hub, which is ultimately to be one of the most important transfer hubs in Europe. The purpose of this paper is to introduce readers to the planned investment and present a discussion of its actual construction and legal status. Among other things, the paper discusses the assumptions of the project, as well as the phases of its implementation, the specifications of the investment and the possibilities of achieving the expected success. In addition, the author extends the discussion of the investment with an analysis of its possible benefits, including the advantages and disadvantages of the plan, and also provides her suggestions for the success of the investment. The paper is a preview of the changes underway in Europe's major hub market.

Analysis of Airports Served by Ultra Low-Cost Carriers

Recently the domestic aviation industry has been influenced by rapidly growing ultra low-cost carriers (ULCCs). The pattern of airport markets served by ULCCs is incongruous with legacy carriers and low-cost airlines alike. Existing literature, however, is limited for North American ULCCs: research has only recently begun to identify them separately from mainstream low-cost carriers. This study sought to understand the market factors that influence ULCC service decisions. The relationship between ULCC operations and airport market factors was analyzed using three methods: mapping 2019 flight data for four ULCCs combined, two regression analyses to evaluate variables, and three case studies examining distinct scenarios through interviews with airport managers. Enplanement data were assembled for every domestic airport offering scheduled service in 2019. Independent variables were collected for each Part 139 airport. The first model estimated an ordinary least squares regression model to analyze ULCC enplanements. The second model estimated a binary logistic equation for presence of ULCC service. Case studies for Bellingham, Waco, and Lincoln were selected using compelling airport factors and relevant ULCC experience. Maps of ULCC enplanements revealed concentrations of operations on the East Coast. Both regression analyses showed strong relationships between population and non-ULCC enplanements (two measures of airport market size) and ULCC operations. A significant relationship also existed between tourism and enplanements. In the logit model, distance and competition variables were associated with ULCC presence. Case studies emphasized the importance of airport fees and competition in ULCC preferences, although aeronautical costs were generally not significant in the regressions.

The effects of airport slot allocation method on competition: Empirical analysis of competition through slots at JFK International Airport

Purpose- This study aims to indicate the effects of the current slot allocation method specified in the IATA Worldwide Slot Guidelines, which is used to allocate airport slots to airlines, on airline transport market concentration and competition. Methodology- John F. Kennedy Airport (JFK), which allocates slots to airlines with the IATA method, was taken as a sample in the study. Airline’s JFK slot data obtained from the Federal Aviation Administration's Slot Administration Office were analysed with the Herfindahl-Hirschman Index (HHI) and the n-Firm Concentration Ratio (CRn). Findings- According to the findings obtained from the analyses, it has been stated that the concentration in the JFK International Airport market is high and the competition is low. It has been determined that the majority of the slots are owned by 3 long-established US airlines using the airport as their base airport, and the remaining slots are shared by many airlines. Conclusion- As a result of the study, it is revealed how the historical rights and pool system in the current slot allocation method affect concentration, competition, new entrants to the market and the power of new entrants to increase their shares. Keywords: Airport slot, market concentration, competition, Herfindahl-Hirschman, CRn JEL Codes: B22, D40, L93

Efficiency of Regional Airports: Insights on the Effect of Airline Type and Seasonal Variations in Traffic

This paper aims at exploring the efficiency of regional airports, whose traffic is highly dependent on touristic flows, and the impact of some external factors such as low-cost airlines, charter air traffic and seasonality. The analysis focuses on the airport market in Greece within the time period from 2010 to 2016. A bootstrapped data envelopment analysis model is developed and the Malmquist Productivity Index is computed to estimate the total productivity change between 2010 and 2016. This is followed by a tobit regression model to estimate the impact of the external factors on the airport efficiency scores. Our findings indicate that the considered factors significantly affect airport efficiency. More specifically, the low-cost airlines and charter flights contribute to increasing airport efficiency, while the seasonality might be seen as an obstacle to improving airport efficiency. To the best of our knowledge, this research goes beyond any previous study in the Greek airport market and could be useful for several practitioners, such as airlines, airport operators and hotel businesses, as well as policy-makers and authorities.

How has airport service quality changed in the context of COVID-19: A data-driven crowdsourcing approach based on sentiment analysis

Airport service quality (ASQ) is a competitive advantage for airport management in today's airport market. Since the COVID-19 health crisis has unprecedentedly influenced airport regulations and operations, effective measurement of ASQ has become crucial for airport administrations. Surveying travelers' attitudes is useful for ASQ assessment but collecting responses could be time-consuming and costly. Therefore, this paper adopts a data-driven crowdsourcing approach to study ASQ during the COVID-19 pandemic by investigating Google Maps reviews from the 98 busiest U.S. airports. To do so, this study develops a topical ontology of keywords regarding ASQ attributes and uses a sentiment tool to derive passengers' attitudes. Through sentiment analysis, Google Maps reviews show more positive sentiment toward environment and personnel but remain constant about facilities during COVID-19. The lexical salience-valence analysis (LSVA) is then applied to explain such changes by tracking the sentiment of frequent words in reviews. Through correlation and regression analysis, this study demonstrates that rating is significantly related to check-in, environment, and personnel in pre-and post-COVID periods. Additionally, the effect of access, wayfinding, facilities, and environment on rating significantly differs between the two periods. The findings illustrate the effectiveness of leveraging online reviews and offer practical implications for what matters to air travelers, especially in the COVID-19 context.

Analysis of Competition Relationship of Multiairport Regional Airport Market Based on Deep Learning

At present, China’s civil aviation industry is in a period of rapid development. The passenger traffic is increasing year by year. The contradiction between the demand and supply of flight resources is becoming more and more prominent, and the competition between airports is becoming more and more fierce. Driven by local development and the country’s overall planning, there are more and more multiairport areas, so how to analyze the airport market competition in multiairport areas needs to be further realized. This paper constructs a two-dimensional Hotelling model based on flight frequency and passenger travel cost to analyze the internal mechanism of market competition among multiple airports. It is assumed that, in a multiairport area, two airports are distributed at both ends of a linear straight line, and the other airport is in between, and each airport provides displacement services connecting the same destination airport. The research shows that, (1) with the increase of the flight frequency of the airports at both ends, its equilibrium profit shows a trend of decreasing first and then increasing; the difference of the flight frequencies of the airports at both ends affects the equilibrium profit of the middle airport. (2) With the gradual increase of flight frequency, the reduction of passenger travel cost will make the equilibrium market share and equilibrium profit show a trend of first decreasing and then increasing. (3) Taking the Yangtze River Delta regional airport as an example, it is found after verification that increasing flight frequency or reducing passenger travel costs can increase the balanced profit and market share of Hangzhou Xiaoshan Airport and Nanjing Lukou Airport; increasing flight frequency can improve the balanced profit and balanced market share of Sunan Shuofang Airport.

Why survey data is fundamental to developing data-driven strategies

Understanding airport customers is ever more critical to adapt operations to the current and post- COVID-19 airport market. Gathering insight as to how the airport market has changed is critical to help instill confidence in air travel, meet the needs of airport users and identify opportunities to enhance revenues. Survey research is the most reliable method of collecting information directly from individuals about what they believe and how they behave. Surveys can be administered using a variety of formats to help identify short-term operational challenges as well as long-term planning strategies. Survey design and data analysis, however, must be carefully executed. Ideally, project professionals should possess a deep knowledge of survey research methods and statistical analysis, as well as experience with the nuances of the entire airport ecosystem to ensure scarce budgets and resources are best used.

Airport technology systems in the design-build environment

The design-build method for construction is increasingly being applied to the delivery of airport projects. This includes the technology systems that are necessary for the efficient operation of these facilities. Technology systems present a unique set of challenges to the design-builder, many of which will be new to contractors. This paper examines the issues associated with the design-build approach to technology in the airport market, and ways in which the design-builder can adjust and refine their approach to deliver projects more effectively.

AIRPORT TYPOLOGY FOR LCC POLICY CHANGES: A EUROPEAN PERSPECTIVE

This paper proposes a new airport typology that might arise from the expansion of airports with dominant low cost carrier traffic. In the first part of the paper, the typologies and different airport categorizations are reviewed with examples of current taxonomies used by principal international organizations. However, none of the current airport taxonomies takes into account low cost (LCC) carriers and cannot be used to create an airport market strategy with LCC operation. The paper highlights the characteristic of LCC features, the differences between the LCC airlines, and the characteristics of secondary – low cost airports. Finally, the paper proposes a new taxonomy of airports with low cost operations based on the airport data analysis and expert panel elucidation. For identification of airports with a high share of low cost carriers, Eurocontrol 2013 data on airline types and movements were used. The novel classification of low cost airports enables management to design marketing strategies to respond to LCC dominance and its implications. The main contribution of this research is to provide a novel classification for low cost airports which is relatively new phenomenon comparing with the problems of full service carriers dominance at large airports.

How do firm and market characteristics affect airports’ Beta risk?

I present a graphical framework based on Subrahmanyam and Thomadakis (1980) that allows to study the impact from firm and market characteristics on systematic risk associated with the return on capital, i.e. Beta risk, for utilities under price control. Within this framework, Beta risk is driven by the magnitude of profit fluctuations following demand shocks. The framework is then applied to airport firm characteristics and airport market environment features. I find that the frequency of price control resets, the level of operating leverage, the extent of capacity constraints, and the degree of market power all have an unambiguous effect on the level of Beta risk. The scope of the regulatory perimeter and the type of traffic mix may also affect Beta risk; however, the magnitude and direction of their impact rely on the specifics of the case. The article may assist policy makers to formulate economically sound recommendations on how the regulatory rate of return for airport operators should be determined. Specifically, my findings suggest criteria that can be used to choose adequate peer companies of comparable systematic risk.

Single till V. Dual till and the Paradox of Airport Competition

Airports’ regulatory till has been an issue of debate between airlines and airports for some time now. In 1most of the cases the type of till is set by legislation or it is part of concession agreements under which many airports operate now in Europe. As claimed by airlines and airlines associations the use of the single till, under which non aeronautical revenues are taken also into account when considering the level of airport charges, it rightfully reflects the indispensable link between aeronautical and nonaeronautical services provided at an airport, while the use of either the dual till concept where only aeronautical revenues are taken into account for setting airport charges or of the hybrid till mechanism under which only part of the non-aeronautical revenues are considered, is an evidence of lack of competition among airports and of misuse of their market power. Airports on the other hand indicate that the full costs of aeronautical charges and therefore the principle of cost relatedness is ensured under the dual till concept and the choice of regulatory till cannot be related to the competitiveness of the airport market or with abusive conduct. Recent evaluation assessments however carried out by the European Commission does not seem to accept as sufficient evidence of misuse of market power of airports the use of dual till, while airports have long before been subjected to the competition rules.

An exploratory analysis of the effects of ownership change on airport competition

Common or group ownership of airports poses a particular challenge for policy-makers, in that consumers (airlines and passengers) may not have access to benefits that stem from a more competitive system (e.g. lower prices, higher quality of service). However, whilst the arguments for and against group versus individual operations are well known, there are only limited practical cases when a change from common to individual ownership has occurred. One such case is in Scotland where the ownership of Edinburgh and Glasgow airports was separated in 2012. Therefore, the aim of this paper is to undertake a comparative assessment of the impact of this ownership change on the nature of competition between the two airports for the period 2006–2017. Catchment areas overlap, so it was hypothesised that separate ownership would lead to a more intense competitive rivalry with consequent effects on route development, traffic growth, the level/structure of aeronautical charges, financial performance, capital investment and quality of service. A number of key performance indicators covering these areas have been analysed, both before and after 2012 to assess whether there is evidence of a more competitive environment. The main findings are (i) traffic and routes have increased at both airports, although their relative roles appear to have changed; (ii) published charge levels have increased (iii) aeronautical yield has increased at Edinburgh but declined at Glasgow; (iv) prices have diverged reflecting differences in core market price elasticities; strategies have also been driven by a broader financial imperative around maximising EBITDA given declining unit costs and stagnation in non-aeronautical yields; (vi) certain performance indicators suggest that efficiency and service quality have improved. The implications for policy-makers are that airport market re-structuring and ownership change will most likely lead to divergence in pricing and route development strategies.

Joint impact of airline market structure and airport ownership on airport market power and profit margin

This paper investigates the joint impacts of downstream airline market structure, airport ownership structure, concession services, and low-cost carrier (LCC) presence on airport market power and profit margin. Lerner indexes for a sample of 61 major airports around the world were calculated for the period 2008–2014. Then, regression analysis was conducted to identify the determinants of the airport Lerner index. We find that a more concentrated downstream airline market would reduce the profit margin for a public airport but increase the profit margin for a private airport. A higher share of concession service is found to decrease the airport's overall profit margin (accounting for both aeronautical and concession services). Airports with significant LCC presence have a lower profit margin. Finally, the concentration in airline market is found to have a larger negative impact on airport aeronautical price than on the concession price.

An empirical analysis of delays in the Turkish Airlines network

This paper investigates the determinants of delays on international and domestic routes of Turkish Airlines in 2014, focusing on the effects of airport market share and airport market concentration. When examining the impact of airport market share, we find that delays are decreasing in market share for both domestic and international routes. We use market concentration to test whether airlines internalize the cost of the delays for their passengers. We find results that are consistent with the internalization hypothesis on domestic routes; however, on international routes, our estimates are inconsistent with the internalization hypothesis. We propose that these results may be due to market share being more critical than market concentration in determining delays and that the internalization effect is limited. Additionally, we find that delays are lower at airports that connect to more destinations.

Could market power explain hub premiums?

Hub carriers tend to charge higher fares to their passengers at their hubs. The additional charge is called the hub premium. Different studies have discussed the possible causes of the hub premium. Using the fare data at Hong Kong International Airport, this paper aims at empirically examining the factors affecting the hub premium for both economy and business class markets. The random effect models are employed in the analysis. Consistent with the theoretical results in the literature, airport market concentration, market power, flight frequency and distance are identified as significant factors that affect the hub premium in Hong Kong. In addition, this paper further investigates the impact of strategic alliance and the acquisition of Dragonair by Cathay Pacific on the hub premium.

Competition, vertical relationship and countervailing power in the UK airport industry

In this paper, we study whether competition in the airport market and the vertical interactions between upstream airports and downstream airlines influence the airport pricing decisions. Using a panel of the 24 largest UK airports, as well as a refined definition of airports’ market structure, we find that lower concentration in an airport’s catchment area and higher airlines countervailing power are associated to lower aeronautical charges.

Feasibility and desirability of airport competition: The role of product substitutability and airlines' nationality

Competition between airports within a nation is not always feasible. Some airports are sheltered from other airports competition because catchment areas do not overlap due to geographical reasons or consumers' preferences. This is not necessarily serious if competition with non-national airports exists, or the existence of other goods strongly interrelated with the airport market limits the possibility of market power. However, even when competition between airports is feasible, there is no consensus among academics and practitioners about its desirability. In this paper we argue that, even when airport competition is feasible, it might not be desirable from the national point of view. Our argument is based on the joint analysis of airports' market power, airlines' market power, and airlines’ nationality.

Development of competition on the airport market in Poland

In the air transport market is intra- and external competition. In the aerospace sector there is competition between carriers, airports and other companies. Airports, although they serve the regional area, are striving to increase the catechment area. This is due to the development of transport infrastructure. The main aim of the article is to present competitive processes at airports in Poland. Examples of airports in Katowice, Krakow, Poznan and Wroclaw analyzed the compet­itive processes. These airports have been selected as some parts of the catchment area coincide. The author did marketing research at Polish airports. Based on the original data, the functioning of the air transport links system was evaluated. On the basis of secondary data, the author analyzes the conditions of operation of airports. The purpose of the article has been proved, the conclusions are outlined in the last part.

Why passengers’ geo-demographic characteristics matter to airport marketing

ABSTRACTPassengers’ preference and origin location data (home postcodes) can be extremely useful for marketing purposes, with the potential for more effective customer segmentation and targeting, yet traditional airport market research has often neglected these aspects. This paper utilises passenger survey data from the Gold Coast Airport in the state of Queensland, Australia, to perform a geo-demographic classification analysis in conjunction with census data. With geo-coded passenger preference data, the trip characteristics and airport decision preferences were cross-compared with demographic data with socio-economic variables. The results revealed distinctive contrasts in passenger origin location for short-haul domestic trips and long-haul international trips, in which passengers from afar are willing to travel longer distances to reach a second-tier airport to make use of cheaper airfares. One of the implications of this study is that low-cost carriers’ businesses (the airlines or the airports) should better target their customers by offering geographically targeted marketing.

Selecting and understanding aviation security systems: Cutting through the marketing hype

The introduction of new, advanced security technologies into the airport market has led to greater confusion, expense and complexity in the delivery of a safer, more secure environment for passengers and stakeholders. Many new technologies and capabilities have been introduced and sold, largely on the appeal of being high-tech and cutting edge, while the true costs, challenges, practicalities and difficulties in implementation and delivery are obscured or omitted. This is further complicated by a reduction in professional, expert support, oversimplified procurement practices, and an emphasis on staying current or even cutting edge. Airport operators and security professionals can avoid costly disappointments by better understanding the true capabilities of many of these technologies, and taking a step back to look at the broader picture, from operational concepts to the actual delivery of the security service and systems.