Emergence Of Low-cost Carriers Research Articles

Examining the determinants of Indian airlines’ revenues

The Indian aviation sector has undergone remarkable growth, driven by the emergence of low-cost carriers and diverse business models. This has resulted in a surge in passenger numbers and aircraft orders, establishing India as a vibrant global aviation market. However, this rapid expansion is accompanied by significant financial challenges, leading to distress and insolvency among numerous airlines. Despite optimistic growth forecasts, high operating costs and relatively low revenue returns pose substantial hurdles. Motivated by these challenges, this study aims to uncover the key factors influencing revenue generation in the Indian aviation industry by analysing expenditure components and their impacts on costs. The objective of this study is to address the research gap stemming from the lack of previous studies on Indian airlines that address endogeneity issues related to airline expenditures. By utilising data from 2007 to 2022 sourced from the audited annual reports of each airline, we aim to provide essential insights into the revenue dynamics of Indian airlines through the application of various econometric models including instrumental variables (IV) regression and generalised method of moments (GMM) models for improving causality and addressing endogeneity. Our findings reveal a positive correlation between unit revenue and factors such as unit expenditure, staff numbers, and passenger volume, while also highlighting the positive impacts of airline alliances and regional connectivity schemes. This research not only sheds light on industry intricacies but also underscores the imperative to address key variables to enhance the sector's sustainability and resilience in the face of ongoing challenges, offering valuable contributions to both academia and industry stakeholders for informed decision-making and strategic planning.

A PLS-SEM Approach: Examining Factors that Influence the Growth of Low Cost Carriers for Post-Pandemic Travel

Despite the Covid-19 outbreak in late 2019 that caused fears of traveling on a global scale, the airline's business outlook in the South East Asia region seems to be badly affected. A bigger challenge that remains in the industry is the uncertainty of the market growth for post-pandemic travel in this highly competitive airline industry. Therefore, this study aims at investigating the factors that influence the market growth of Low Cost Carriers such as Air Asia for post-pandemic travel. A sample of 500 respondents was collected through simple random sampling from those who had travelled at least once with LCCs in the past 5 years. The results indicate that brand image has the strongest prediction towards the growth of LCCs in this region. This study provides useful information for strategic planning in the LCCs industry and to better understand the travellers’ needs in the region.

The Case of South Korean Airlines-Within-Airlines Model: Helping Full-Service Carriers Challenge Low-Cost Carriers

The South Korean aviation market has grown rapidly since the emergence of Low-Cost Carriers (LCCs), and in response to this emergence, the two Full-Service Carriers (FSCs) of South Korea adopted the airline-within-airline (AWA) model and introduced their LCCs to compete with independent LCCs (ILCCs). A few years back, ILCCs filed a petition against Asiana Airlines, one of the two FSCs in South Korea, as Asiana Air was launching another subsidiary on the model of AWA. This, interestingly, indicates that AWA are doing well in the South Korean aviation market. However, a detailed study is required to evaluate the performance of this model, as in the global market the success of AWA is blurred. This study attempts to shed light on the performance of South Korean AWA, which may provide fruitful insights considering the post-COVID-19 dynamics of the aviation market.

Passenger, airline, and policy responses to the COVID-19 crisis: The case of South Korea

In recent years, domestic and international air passenger markets have expanded steadily around the world with the rapid growth of low cost carriers and aggressive route expansion; however, the unprecedented crisis caused by the coronavirus disease 2019 (COVID-19) pandemic resulted in greatly decreased air travel and an uncertain future for the aviation industry. The present study examined South Korean passengers, airlines, and government policy responses to the COVID-19 pandemic, and it suggests policy directions for the pandemic and post-pandemic periods. Air passengers respond to internal and external factors, and their demand for travel will increase with the reduction in global COVID cases and vaccine distribution. South Korean airlines have used various means to overcome decreased passenger numbers, such as domestic route transitions, freight transportation expansion, and mergers and acquisitions; Korean Air recorded a profit through its foray into cargo transport in 2020. The Korean government is trying to curb the spread of COVID-19 and help the industry to recover by establishing an airport quarantine system at Incheon international airport. As the COVID-19 pandemic continues, it is necessary to continuously monitor the responses of passengers, industry, and governments and to share relevant information.

Scale economies in the Korean airline industry since the entry of low-cost carriers

This paper investigates how the economies of scale in the Korean airline industry have changed since the emergence of low-cost carriers (LCCs). Our sample consists of 66 firm-years from 2008 to 2017. We estimate the translog cost function (TCF) to determine the changes in scale economies during the sample period. The TCF represented airlines' cost function more appropriately than the Cobb-Douglas model. The estimated cost function suggests that overall economies of scale have prevailed in the Korean airline industry since the entry of LCCs. Depending on the type of airline business, scale economies seem to be exhausted for full-service carriers, whereas LCCs have enjoyed economies of scale.

Scale economies in the Korean airline industry since the entry of low-cost carriers

This paper investigates how the economies of scale in the Korean airline industry have changed since the emergence of low-cost carriers (LCCs). Our sample consists of 66 firm-years from 2008 to 2017. We estimate the translog cost function (TCF) to determine the changes in scale economies during the sample period. The TCF represented airlines' cost function more appropriately than the Cobb-Douglas model. The estimated cost function suggests that overall economies of scale have prevailed in the Korean airline industry since the entry of LCCs. Depending on the type of airline business, scale economies seem to be exhausted for full-service carriers, whereas LCCs have enjoyed economies of scale.

The Role of e-Commerce in the Success of Low-cost Carriers

Abstract This research aims to answer the question if e-commerce favoured in a special way the growth of low-cost carriers within the civil aviation market. After defining low-cost and traditional carriers’ business models, data on transported passengers were collected for three countries (Italy, Germany and Spain) and confronted with the number of e-consumers. Despite a significant correlation in all the three markets, only in Italy our hypothesis has been supported by Granger causality, and the regression analysis allows to forecast a future characterized by a growing dominance of LCCs. Although the definition of an econometric model will require further studies, the distinctive features of the Italian market might represent a starting point for future research on the complex relationship between e-commerce and air transport.

INTERNATIONAL TOURISM: MODERN TRENDS, MODELS AND PROCESSES

In a world and travel universe subject to continuous change, the tourism industry is under ever greater pressure to evolve and respond to the world it inhabits - in order to survive. The object of the paper is to discuss and analyze, some of the important issues and trends relating to tourism industries. In particular, ways in which the industry and its consumers are being affected and affecting these trends. The first two sections deploy elements of a steep analysis in order to detect significant demographic and macro political forces affecting tourism industries. Section three considers the “day-to-day…sphere” of travel and tourism, its ‘microenvironment’ and the competitive industry and markets forces they encounter there. The paper reviews one of the most significant micro trends affecting the airline sector: the dynamic growth of low cost carriers. The last part of this work looks into strategic and analytic models associated with tourism, highlighting some of the strategic directional trends being adapted to tourism sectors and into new collaborative forms of social media, communications and marketing.

The dynamic impact of low-cost carriers on full-service carriers and the tourism industry of South Korea: a competitive analysis using the Lotka–Volterra model

ABSTRACTThe emergence of low-cost carriers (LCC) in the aviation industry has dramatically decreased the cost of short-to-medium distance air travel, alongside the growth of the tourism industry. LCC has also changed the competitive dynamics within the aviation industry, challenging the traditional market dominated by conventional full-service carriers. Past studies have demonstrated the scale of impact of LCC on the aviation market, but have yet to explore the intricate dynamics of competition in greater detail. This paper utilizes the Lotka–Volterra model to assess the changing impact of the entrance of LCC on South Korean tourism and airline industries. Our results offer insights to industry players on developing sustainable strategic plans for future routes and tourism destinations in Asia and beyond.

Case studies from New Zealand about the shifting nature of airport–airline relationships

Since 1985 New Zealand has been at the forefront of airport commercialisation. Airport companies have sought ways of developing both aeronautical and non-aeronautical revenues. Driven in part by the emergence of low-cost carriers (LCC), several larger regional airports which did not have international services saw their development as a real opportunity. From 1995, the number of international airports grew quickly from the long-established three to eight, with other airport companies actively seeking such services. These regional airports frequently put into place infrastructure developments to support and encourage international services. Typically provided to Australia and the Pacific Island nations, the number of international services initially grew quickly and then reached a seemingly stable level. Due in part to the volatile nature of LCCs, however, the long-term stability of these services was mixed and after around five years they began to decline rapidly and subsequently ended at three regional airports and were severely curtailed at a fourth. This paper utilises the experiences of New Zealand’s regional airports as case studies to explore the shifting nature of airport–airline relationships from the airports’ perspective. The author reflects on the possible lessons and overall ramifications, given the magnitude and long-term nature of airport infrastructure investments.

Development of Regional Airports in Poland

In Poland, for many years the access to air transport for the average citizen was very limited, both in terms of cost and distance from the airport. After the liberalization of the aviation market and the introduction of the policy of "open skies" this situation has, however, changed dramatically. The emergence of low-cost carriers definitely increased the availability of air transport in financial terms. It had also a great influence on the development of regional airports, which so far played only a subordinate role in relation to the country's central airport in Warsaw airport. The development of regional airports largely removed the territorial limitation of the availability of air transport, since it is from these ports that you can now get to many parts of Europe and the world. Therefore, we are now seeing a continuous increase in the significance of regional airports. This trend concerns not only Poland, but also many other European countries. The purpose of this article is to determine the degree of development of regional airports in Poland and an indication of their role in the country's aviation market against the background of trends in air transport in selected EU countries. DOI: 10.5901/mjss.2016.v7n4p625

항공온실가스 배출현황 및 감축규제 대응방안

Global aviation is projected to grow in demand by an annual average of 4.1% between 2014 and 2034. It can be said that environmental impact from aviation will therefore be expected to increase on a similar scale. As regards civil aviation emissions, the sector contributes between 2~3% to International aviation GHG emissions. In the European Union(EU), aviation emissions account for about 3% of the EU's total green house gas emissions, of which a majority are said to come from international flights. In terms of traffic volume in 2013, Korea's international aviation industry 11th with regard to passengers and 3rd with regard to cargo, attaining the overall rank of 5th in the world. GHG emissions has been increasing steadily over the last 4 years, averaging 3.9 percent a year, due to the growth of low cost carriers and the increased demand for air transportations. As for aviation in Korea, there are a number of means intended to attain the Government's emission control objective in an efficient manner, such as AVA (Agreement of Voluntary Activity), TMS (Target Management System) and ETS (Emission Trading Scheme). In addition, the Government intends to better adapt to ICAO's Global MBM(Market-based Measures) that will come into performance on Year 2020. In the study, we focused on GHG mitigation measures that is fulfilling the AVA, TMS, ETS in the Government and suggest the effective measures to reduction the aviation GHG emissions.

Leisure Travel: Implications for Airline Alliances

The rationale behind the formation of airline alliances includes the reaping of scale and scope economies and the acquisition of marketing and branding advantages. To really add value to the airline customer, however, alliances should consider the purpose of travel, i.e. they should appreciate and understand the derived nature of the airline product. The relevant literature seems to understate this issue or at best focus on business passengers. Given the rising importance of leisure travel and tourism in the world economy, its implications should be explicitly assessed. The emergence of low cost carriers and the subsequent simplifications in the holiday packages offered by charter airlines have played a major role in boosting leisure travel in Europe at least. Still, the intelligent management of frequent flyer programmes and the creation of a seamless network in long haul (or even intercontinental) air travel may induce leisure passengers to opt for an allied airline instead. This paper addresses the topic by undertaking primary research in the form of semi-structured interviews with airline executives and structured questionnaires addressed to passengers. The interviewees are supportive of the view that alliances of network carriers may offer benefits to leisure passengers although they do recognise the competitive threat posed by low cost carriers. Similarly, the statistical analysis of the questionnaire results reveals that frequent flyers and more affluent respondents are more knowledgeable about strategic alliances and have a tendency to prefer allied carriers for long-haul but not for short-haul flights. This outcome may add to the understanding of airline alliances and consumer behaviour and have important implications for airline strategy at a global level.

저탄소 운항절차에 따른 연료절감 효과분석

The amount of greenhouse gas (GHG) emissions has been increasing steadily over the last 4 years, averaging 6.8 percent a year, due to the growth of low cost carriers and the increased demand for air transportations. For the aviation GHG reduction, various fuel saving activities are implemented in many areas such as high-efficiency aircraft and bio-fuel development in the technical part and low carbon flight procedures, short cut route development in the operational approach. Among the various reduction technologies, we focused on low carbon flight procedures that are crucial to GHG reduciton and suggested a reduction effect according to target implementation rate using by fuel saving estimation data in each aircraft type.

Segmented Competition in Airlines: The Changing Roles of Low-Cost and Legacy Carriers in Fare Determination

The rapid growth of low-cost carriers has transformed the U.S. airline industry over the past decade. Low-cost carriers (LCCs) now are much larger overall, sometimes even dominating individual routes, and have moved into more direct competition with legacy carriers. This paper re-examines fare determination, using standard data sources but modifying existing models to allow for this new structure. It finds that LCC presence has a larger fare impact than do legacies, but that their fare-reducing effect diminishes past some total share point and dominance of the low-cost segment or on a route results in diminished fare reduction relative to a more fragmented market. Other issues include the effects of individual carriers on overall fares, and their effects on LCC vs. legacy prices. This paper also establishes the importance of potential competition and the imperfect substitutability of connect service and adjacent-airport service. All of these results cast new light on airfare determination in the modern industry.

Airline competition and domestic US airfares: A comprehensive reappraisal

This paper extends recent research on the fare impacts of low-cost carriers, incorporating its adjacent-airport approach to offer a comprehensive picture of the competitive effects of both legacy carriers and low-cost carriers. The analysis measures the impact of in-market (i.e., airport-pair) competition and adjacent competition for both types of carriers, while also capturing the impact of potential competition from low-cost carriers. Moreover, this comprehensive approach is applied separately to two different types of markets, nonstop and connecting, which have not been simultaneously treated before within a single study. The results show that most forms of legacy-carrier competition have weak effects on average fares. Low-cost carrier competition, on the other hand, has dramatic fare impacts, whether it occurs on the airport-pair, at adjacent airports, or as potential competition. ► Growth of low-cost carriers (LCCs) has changed the landscape of airline competition. ► This paper offers a comprehensive picture of the competitive effects of both legacy carriers and LCCs. ► The impact of both in-market and adjacent competition is measured for both types of carriers. ► This approach is applied separately to two different types of markets: nonstop and connecting. ► Legacy competition has a weak effect on average fares and LCC competition a dramatic effect.

BUSINESS RELATIONS BETWEEN THE LOW COST CARRIERS AND AIRPORTS AS A CONSEQUENCE OF THE AIR TRANSPORT DEREGULATION

The deregulation of air transport has increased competition between air carriers, resulting in lower fares and increased volumes of passengers. Subsequently, the fare reduction has altered the market structure with the establishment of new carriers, strategic alliances and mergers, and the bankruptcy of several traditional airlines which were unable to adapt to the new environment. The emergence of low cost carriers (LCCs) is one important outcome of the deregulation. LCCs entered the market by offering a differentiated product based on bare services offered at significantly lower prices. The main target was travelers with increased sensitivity in pricing and less demand for all-around services. The rise in terms of passengers and flights dictated a better utilization of the fleet, requiring reduced turnaround times at airports. Many central airports had very little flexibility and capacity necessary to facilitate additional timeslots. As an answer to inadequate capacity combined with higher taxes and fees, most LCCs have chosen to use secondary or regional airports. This choice has altered the balance and strategic importance between airports and increased their importance for air carriers. This paper examines the evolution and development of LCCs globally, along with the consequences of their expansion to the traditional carriers, the market and the passengers. Emphasis is given to the relationship between LCCs and airports which has resulted in an additional increase in air travel. The prospects of Greece as a market for LCCs are also being discussed.

Low Cost Carriers and the Evolution of the U.S. Airline Industry

The article studies the evolution of the U.S airline industry from 1995 to 2009 using T-100 traffic data and DB1B fare data from the U.S. Department of Transportation. Based on a differentiation in market size and major players, entry and exit, concentration, fares, service, costs and profits, the article provides a fresh look on recent developments in the structure, conduct and performance of the domestic U.S. airline industry in light of both the substantial growth of low cost carriers and severe internal and external shocks such as merger and bankruptcy activity or the recent recession. Unlike previous studies, a consistent split of the analysis in network carriers and low cost carriers is introduced. In general, we find that the competitive interaction between network carriers and low cost carriers increased substantially throughout the last decade and must be considered as the main driver of competition in the domestic U.S. airline industry.

The impact of strategic management and fleet planning on airline efficiency – A random effects Tobit model based on DEA efficiency scores

As a result of the liberalisation of airline markets; the strong growth of low cost carriers; the high volatility in fuel prices; and the recent global financial crisis, the cost pressure that airlines face is very substantial. In order to survive in these very competitive environments, information on what factors impact on costs and efficiency of airlines is crucial in guiding strategic change. To evaluate key determinants of 58 passenger airlines’ efficiency, this paper applies a two-stage Data Envelopment Analysis (DEA) approach, with partially bootstrapped random effects Tobit regressions in the second stage. Our results suggest that the effects of route optimisation, in the sense of average stage length of the fleet, are limited to airline technical efficiency. We show that airline size and key fleet mix characteristics, such as aircraft size and number of different aircraft families in the fleet, are more relevant to successful cost management of airlines since they have significant impacts on all three types of airline efficiency: technical, allocative and, ultimately, cost efficiency. Our results also show that despite the fuel saving benefits of younger aircraft, the age of an airline’s fleet has no significant impact on its technical efficiency, but does have a positive impact on its allocative and cost efficiency.

Did LCCs save airline revenue management?

The growth of low-cost carriers (LCCs) and their simplified fare structures highlighted the weaknesses of traditional airline revenue management (RM) forecasting and optimization. The LCC pricing revolution caused RM systems to falter and threatened decades of scientific research and RM system investment by airlines. At the same time, it provided a much-needed impetus for new RM research into improved forecasting and optimization models, laying the foundation for the next generation of airline RM systems.