Lower Fares Research Articles

The impact of low-cost carriers on high-quality producers in the aviation industry: cost-benefit analysis

PurposeThis paper aims to examine the low-cost carriers (LCC) impact on the high-quality carriers (HQC) in the aviation industry. The impact of LCCs on high-quality producers in the aviation industry has been a significant and multifaceted phenomenon.Design/methodology/approachThe study employs a captivating case study approach, investigating into the intricate fabric of the subject matter. Interviews serve as the cornerstone of primary evidence, offering first-hand insights, while secondary data sourced from documents adds depth to the exploration of the challenges encountered by the HQC.FindingsThe study concludes that LCCs have disrupted the traditional aviation landscape by offering low fares, simplified service models and aggressive cost-cutting strategies. This disruption has affected both the high-quality producers, such as full-service airlines. Full-service airlines have adopted a strategy of segmenting their market by offering multiple fare classes, with varying levels of service and flexibility. This allows them to target both price-sensitive travelers and those seeking premium services, catering to a broader customer base. The competition from LCCs has spurred innovation within the aviation industry, leading to advancements in technology, digital services and operational efficiency. Airlines, both LCCs and traditional carriers, have had to adapt to evolving consumer preferences and embrace digital solutions for booking, check-in and in-flight services.Research limitations/implicationsWhile this study provides a valuable cost-benefit analysis of the impact of LCC on high-quality producers in the aviation industry, it is essential to acknowledge its limitations and recognize the avenues for future research to further enhance our understanding of this complex and evolving industry landscape. While this study contributes valuable insights into the impact of LCCs on high-quality producers in the aviation industry, it is essential to recognize its limitations and identify opportunities for future research to expand our understanding of this complex and dynamic landscape. By addressing these limitations and exploring new avenues of inquiry, we can continue to advance our knowledge and inform evidence-based decision-making within the industry.Originality/valueThis study pioneers an exploration into the intricate tapestry of factors molding the future of the aviation sector. Through its groundbreaking analysis, it furnishes indispensable insights for industry stakeholders, policymakers and the discerning traveling public, setting a new benchmark for understanding and navigating the aviation landscape.

Airline price responses in the face of demand shocks: European lessons from the COVID-19 pandemic

We exploit the exogenous demand shock in the aviation sector that resulted from the spread of the COVID-19 pandemic to investigate how airlines responded in terms of pricing strategies. By using monthly fare data for flights operated within the EU-27 member states over the period 2017–2022 and by quantifying the intensity of pandemic cycles through a stringency index, we estimate price regressions at the route–airline level. Our findings reveal that the demand drop has prompted lower fares and increased intertemporal price dispersion. Furthermore, we show that fare cuts are not explained by airlines operating fewer flights. By analyzing heterogeneous price responses to the demand shock as determined by various route and airline characteristics, we find a stronger reaction on international markets and greater resilience of low-cost airlines. We also show that the regulations in the form of public service obligations and state aid programs for airlines helped the beneficiaries but not travelers.

Potential Demand for E-grocery Delivery Services: The Effect of Delivery Attributes on Consumers Preferences

Because of the COVID-19 pandemic, the e-grocery sector has experienced a boom in demand. Even now that the emergency is over, consumer demand continues to grow. Therefore, it is helpful to analyze what factors drive consumers' choices and what could be expectations for the near future. This work uses a discrete choice experiment to investigate the potential e-grocery demand (goods and services). For this purpose, a stated and revealed preference survey was developed to highlight the intention to switch from the traditional to the digital market, also considering the consumers' interest toward delivery and collection preference. The results indicate that even though most people are satisfied with their current behavior in the traditional market, the e-grocery market is seen as an opportunity for convenience and flexibility, low fares, and a precise delivery organization for both click and collect or home deliveries that meet the needs of consumers.

Perputaran Piutang Terhadap Return On Asset pada PT Air Asia Indonesia Tahun 2015-2022

PT Air Asia Indonesia Tbk is a domestic and international airline with low fares but has a variety of attractive offers and services. This study aims to find out and compare receivables turnover at PT Air Asia Indonesia Tbk against Return On Assets. The research method used is quantitative analysis, processed using statistics to draw general conclusions. The hypothesis in this study is that accounts receivable turnover (X) has a positive effect on return on assets (Y). The data used is secondary data obtained in the form of financial reports received from the official website of the Indonesia Stock Exchange, www.idx.co.id. Furthermore, the data is processed using classical assumption test data analysis, hypothesis, simple linear regression, and the coefficient of determination using SPSS Ver. software. 22. The output of the SPSS conclusion results that Ha is accepted and H0 is rejected. Then, from the test results of the coefficient of determination, it is known that accounts receivable turnover has significantly reduced the return on assets by 41.5%. Thus, it can be interpreted that there is a significant influence on Return On Assets (X) at PT Air Asia Indonesia Tbk.

Social Justice in Urban Public Transportation: A User-Centric Analysis of Fares in Portoviejo, Ecuador

Objective: To examine the perceptions of socially just fares among urban public bus users in Portoviejo and to assess the potential impacts of fare increases on the most vulnerable populations and the subsequent changes in their mobility behavior. Method: To unpack the multiple facets that shape the notion of justice, we conducted a two-stage clustered observational study using a survey administered to a sample of urban bus users. The data collected were scrutinized using three analytical methods: exploratory description, hypothesis testing, and binary logistic regression. Results: Our findings revealed that most bus users are women, under 35 years of age, and earn at most the minimum wage. These younger, lower-income users who utilize the bus less frequently, tend to view lower fares as just compared to their counterparts in different user profiles. When fares exceed what they perceive as just, these users tend to mitigate their bus usage, opting to walk more or invest in a bicycle or motorcycle for their daily transport needs. Conclusion: The intersection of public transport fares and social justice is not an extensively researched area, and one key theoretical challenge is balancing the principle of universal provision with users' varying payment abilities under the framework of social justice. Future research on this intersection should explore factors beyond fares, such as safety, accessibility, territorial coverage, and travel time, and consider alternative fare models to address socioeconomic disparities and improve overall well-being.

Airline revenue management with segmented continuous pricing: methods and competitive effects

With the introduction of IATA’s New Distribution Capability (NDC), airlines will no longer be limited to discrete fare classes for their fare product distribution but could show fare quotes from continuous ranges to booking requests. NDC will also allow airlines to present different fare quotes to passengers from different demand segments as identified by the airline. In theory, airlines can better extract passenger willingness to pay, and thus, see gains in revenue, by offering segmented continuous fare quotes to different passengers requesting to book. This paper describes the revenue management (RM) methods for Segmented Continuous Pricing and examines their potential effects on airlines’ revenue through simulations in the Passenger Origin–Destination Simulator (PODS). We describe a class-based algorithm for continuous pricing, a straightforward extension from the traditional methods used with existing RM systems. Our simulation results show that in a calibrated scenario in which only one airline adopts Segmented Continuous Pricing and has an 80% accuracy in identifying business versus leisure passenger booking requests, the first-mover airline can see as much as a 17% revenue gain, at the expense of competitors. The revenue gains come primarily from the leisure passenger segment by offering lower fares than competitors closer to departure. The first-mover airline loses bookings but does not see losses in revenue from the business passenger segment. We also explore potential response strategies by the competing airlines. We discover that competitors can reverse the first-mover’s revenue gain by removing their fare restrictions while still using traditional RM methods. We conclude that although adopting Segmented Continuous Pricing is promising in theory, its gains in practice will depend heavily on the competitive situation and the responses made by competing airlines.

Flight ticket taxes in Europe: Environmental and economic impact

We examine the causal impact of flight ticket taxes on airline flights and derived CO2 emissions and analyse its distributional effects between airlines and travellers and within travellers. We use a dataset on flights within Europe at the airline-route level and apply a staggered difference-in-differences approach considering potential bias of the standard two-way fixed effects and the potential distorting effects of heterogeneities between treated and control routes. The main analysis focuses on low-cost airlines because connecting passengers are typically excluded from the tax. We find that flight ticket taxes have a significant overall effect on low-costs airlines supply and derived emissions: ticket taxes reduce the number of flights per airline-route by 12% on average compared to the counterfactual scenario, resulting in a 14% reduction in carbon emissions. In addition, we estimate a pricing equation using a quantile model to identify the cost pass-through rate over the distribution of the fare variable. The burden of the tax is higher for passengers paying low fares, so taxes have a stronger effect on avoidable flights with less added value and a smaller internalization of the total costs of flying.

Investigating the Operation of an LNG Carrier as a Floating Power Generating Plant (FPGP)

The paper provides a novel alternative solution for the old generation turbine LNG carriers (LNG/Cs) in order to extend their life cycle, thus avoiding their demolition. Nowadays, the use of liquefied natural gas (LNG) as fuel for the production of electricity is predominant against other fossil fuels. LNG has been widely recognized as the most promising alternative fuel, combining both high efficiency and environmental friendliness. The old generation of steam turbine LNG/Cs with the distinct disadvantage of a low thermal efficiency ratio, leading to higher fuel costs, are coming to a crossroad, which is either to keep the vessel on duty until the end of their life cycle, earning low fares as those are not preferred from the charterers, or to change the use of the vessel, converting them either to a FSRU (floating storage regasification unit) or to a FPGP (floating power generating plant). In this paper, the last alternative is proposed via a holistic examination of the techno-economical (the CBA performed calculates all related metrics) but also in terms of the electric energy market by utilizing power purchase agreements (PPAs) and the contracts for difference (CfDs). This conversion into an FPGO is a novel approach providing a ‘win–win’ solution scheme, on the one hand, to areas with the non-economical bunkering chain of LNG along with non-expensive electricity production, while on the other hand, it provides an extension of the profitable life cycle of the LNG/Cs under study, which would otherwise have been considered of obsolete technology. The proposition is supported by figurative numerical case studies that help extract tangible conclusions regarding the degree of the investment viability.

Assessing the economic impact of the single African air transport market: The case of Tanzania

Tanzania is one of the 21 (out of 54) African countries that are yet to ratify the Single African Air Transport Market (SAATM) launched in 2018 as the first project of the African Union's agenda 2063. SAATM aims to create a single unified air transport market for Africa thereby opening skies across the whole continent and aiding the economic integration agenda. Using the two-stage least squares estimator that is robust to endogeneity bias, this study empirically assesses the economic effects of liberalization of air services between Tanzania and other African countries. The results show that removing restrictions on designation, flight frequency, and capacity for air transport between Tanzania and other parts of Africa would lead to a rise in the number of air passengers. Specifically, the results suggest that between 2010 and 2018, routes linking Tanzania and other African countries that were governed by liberal bilateral air services agreements (BASAs) enjoyed slightly lower fares compared to routes governed by restrictive BASAs. The results also suggest that air travel demand is not very sensitive to fare implying that the increase in the flow of passengers by an average of 16.9% between 2010 and 2018 can be attributed to the enhancement in service quality (as measured by flight frequency), and increased competition resulting from the entry of new players or intensified competition among existing ones. The policy implication of this study might be the need for Tanzania to embrace the SAATM initiative.

Evaluasi pelaksanaan road map penataan angkutan umum di Denpasar, Badung, Gianyar dan Tabanan (studi kasus angkutan umum trans sarbagita)

This study aimed to evaluate three aspects of Trans Sarbagita Public Transport Improvement Program consisting of the implementation of the Road Map, analysis of the factors that became the main obstacle and evaluation of the effectiveness of the programs which had been underway. The study used qualitative method with a descriptive pattern through interviews, observation and documentation of institutional factors, stages of the operation of the route, provision of means of transport / bus, provision of operation supporting facilities, financing the purchase of services, passenger fares and service quality. The results showed that the provisions of institutional facilities and institutional forms had not been fulfilled; the number of route network was not in accordance with the plan, the lack of the number of buses, bus stops and traffic signs, limited service fees and low passenger fares and service quality. Therefore a cooperation agreement should be made and the establishment of institutions engaged in service for the management, rearranging the lane routes, increasing the number of buses, bus stops and signs as needed, preparing and evaluating the suitability of bus fares and improving service quality.

Exploring the spatial differences in travel mode choice of rail transit in Chongqing

ABSTRACT People’s use of the rail transit system varies over space. Previous literature suggests there is a social equity dimension in the distribution of benefits from new urban transit systems, but how this varies spatially is poorly evidenced. The research aims to examine the spatial differences in the use of rail transit and associated transport equity. Using a case study of Chongqing, a geographically weighted regression (GWR) model is used to reveal the spatial variation in parameter estimates, complementing the traditional multivariate global model. The analysis demonstrates the effect of rail transit in facilitating people’s travel and mitigating transport-related social inequity, including for those with mobility disadvantages and living in areas with poor access to public transport. The results emphasise the necessity of associated development strategies and transport policies in favour of socially disadvantaged groups, such as low fare levels. Implications for planning interventions are proposed based on the model results.

Perimeter control in a mixed bimodal bathtub model

Perimeter control involves monitoring network-wide traffic and regulating traffic inflow to alleviate hypercongestion. Implementation of transit priority with perimeter control measures, which allow transit into a controlled area without queuing at the perimeter boundary, is an effective strategy in bimodal transportation systems. However, travelers’ behavior changes in response to perimeter control strategies, such as shifts in their departure times and transportation modes, have not been fully investigated. Therefore, important questions remain, such as the use of transit during perimeter control with transit priority. This paper examines the travelers’ behavior changes in response to perimeter control with transit priority in a mixed bimodal transportation system with cars and flexible route transit (FRT) vehicles. We model departure time and transportation mode choices in such a transportation system with hypercongestion and discomfort in FRT (called the mixed bimodal bathtub model). Initially, we investigate the properties of dynamic user equilibrium without perimeter control. Then, we study the equilibrium patterns during perimeter control with transit priority. Unlike existing works, we find that the number of FRT passengers decreases with time toward the desired arrival time and that FRT may not be used around the peak of rush hour. Furthermore, transit priority may not be sufficient to promote the use of FRT, and additional incentive such as subsidy for lower fares may be required to encourage FRT use during perimeter control. Finally, we show that operating many FRT vehicles does not always decrease the equilibrium cost, even under perimeter control with transit priority.

Motorcycle taxis' varying degrees of complementarity and substitution with public transit in Bangkok

Motorcycle taxis are widely used in Bangkok, Thailand and across the Global South due to wide availability, low investment costs to owners, and low fares for passengers. Our study using Bangkok as a case study investigates the role of motorcycle taxis in relationship to public transit, determining if the role of motorcycle taxis could vary across different areas instead of being solely either complementary or substitute. Recent studies on motorcycle taxis have taken an overly broad approach that covers large geographical areas. Most provided a definite one-or-the-other answer, concluding that motorcycle taxis either complement or substitute for public transit. By contrast, our research shows evidence of their adaptive role when looking at smaller areas, where the roles of motorcycle taxis vis-à-vis rail and bus transit change according to locational and spatial characteristics. We use the number of registered motorcycle taxi drivers as a proxy for supply in 180 subdistricts of Bangkok, which were classified into three groups: central business district (CBD) subdistrict, inner suburban subdistrict, and outer suburban subdistrict. Using spatial autoregressive model (SAR) modeling, we found that in outer suburban subdistricts, for every additional transit station, there are 177 more motorcycle taxi drivers. Yet in CBD subdistricts, motorcycle taxi is lowest complementary to rail transit and for every additional bus stop in a CBD subdistrict, there are 10 more motorcycle taxi drivers. This suggests the degree of complementarity between motorcycle taxis and public transit varies with different locational and spatial contexts and transit types. With the findings of adaptive roles of motorcycle taxis depending on land use, transit availability, and activity patterns in each area, policymakers should consider appropriate policies and regulations based on these roles in relation to public transport.

Community-Designed Participation: Lessons for Equitable Engagement in Transportation Planning

Despite years of legally mandated public engagement for transportation planning, there is often little evidence that this results in more equitable processes or outcomes. Recently, there has been interest in improving engagement by having community-based or advocacy groups design, lead, and implement public engagement activities. This research examines two separate engagement processes—one led by a public agency, and one designed and carried out by community advocates—to understand the opportunities and barriers for community-led engagement in transportation planning. We assess how these processes differed in: (1) representation of equity-deserving groups in respondents, (2) conceptualization of equity and community needs, and (3) transportation priorities identified in the surveys. While neither process fully reflected city demographics, the community-led process was more representative of equity-deserving groups. We found key differences in priorities between the community- and agency-led surveys, and by respondent identity. Areas that were identified as a high priority in the agency-led survey, such as traffic congestion, were lowly ranked in the community-led survey, as respondents prioritized safety and lower fares. Critically, community- and agency-led processes used substantially different framings of transportation equity, along with different understandings of community needs and experiences, which could have a significant impact on the development of future transportation plans. Community-led strategies require significant resources and capacity to undertake, but meaningful participation in the design and implementation of engagement processes has the potential to better engage a diversity of perspectives and reflect community priorities.

How strong is demand for public transport service in Nepal? A case study of Kathmandu using a choice-based conjoint experiment

AbstractA public transport system is the most efficient and equitable solution to the challenges of urban mobility and climate change. To improve public transport, technological innovations, policy interventions, and behavioral changes should all be applied appropriately; however, there is a lack of information about the demand for public transport services in developing countries. This paper aims to measure the degree of demand for public transport services by comparing various factors used as a case study in Kathmandu, one of the most congested urban areas in a developing country. We designed a choice-based conjoint experiment with five attributes: mode of transport, waiting time, one-way fare per km, commute time per km, and payment method. Our results indicate that 73% of the respondents are in favor of changing the current transport policy and wish for a shift to public transport, which means that most commuters are in favor of the proposed mode of transport, that is, MRT. On the other hand, the study reveals that respondents have a negative evaluation of motorbikes, one of the most popular modes of transport in Kathmandu. Our results, showing users’ unsatisfactory situation with motorbikes as a transport measure, provide transport planners guidance for addressing current public transport policies, indicating a massive rapid transit system with a low fare would be highly welcome in a typical congestion area like Kathmandu.

Effect of Price Reduction and Increased Service Frequency on Public Transport Travel

A random effects meta-analysis of the results from 15 projects involving price reduction and 9 projects involving increased service frequency showed that both price reduction and increased service frequency generated public transport travels. On average, the increased service frequency projects generated more travels by public transport than the price reduction projects. In the increased service frequency projects the proportion of travels generated by the increased frequency was strongly influenced by the size of the frequency increase. In the price reduction projects, we did not find a significant effect of the size of the price reduction on the proportion of travels generated by the price reduction. Finding that people’s use of public transport was related to the extent of the service offered suggests they have a need for transport that can be fulfilled with public transport. Although people appreciate lower fares in general, finding that use of public transport was not significantly related to the size of a price change suggests the effect of price change is uncertain.

Hybrid Scheduling Model Based on Fare Incentives for Peak Time Interval of the Metro: The Harbin Metro System

Considering the operation efficiency of the metro system, the boarding queuing problem is a complex and intractable dilemma caused by the security and ticket checking process in urban metro stations, especially for the mass-transit metro system in China. In this study, a novel scheme of fare differentials based on demand control and congestion management for reducing congestion in the metro boarding process was proposed. In addition, we extended Vickrey’s point-queue model into a boarding congestion model incorporating the bidesired departure time considering the security and ticket checking process in stations as a continuum bottleneck. The train-run and departure time choosing behaviors of passengers under different schedule gaps of the adjacent train runs are explored when the boarding system achieves user equilibrium in the proposed model. Then, we examined the demand regulatory mechanisms of fare incentives (fare differentials) in reducing the queuing boarding time in metro stations when the optimization of the schedule gaps is ineffective in the pattern of mass-scale travel demand. The analytical solutions of these two optimal methods (schedule gaps and fare differentials) for boarding congestion management are presented. After comparing the two congestion-reduced methods, the fare incentive rule has a better regulation effect on the smoothing of travel demand. The results of the sensitivity analysis using numerical simulations reveal the regulatory mechanism of fare differentials in reducing the queuing time and increasing the incremental revenue. (1) The demand threshold is only related to the boarding capacity and schedule gaps (i.e., the greater the boarding capacity and schedule gaps, the greater the passenger capacity of the metro station). (2) The effect of fare incentives in reducing the boarding congestion is better if the lower fare is implemented in the later train runs. (3) A lower fare differential between two adjacent metro runs can be used to regulate the proportion of staggered passengers in the queuing line to reduce the crowd gathering in the metro station hall when travel demand is high, meanwhile, a higher fare differential between two adjacent metro shuttles can increase incremental revenue effectively. (4) The measure of fare differentials causes worse results in both the reduction of the queuing time and the increase of the incremental revenue when the metro travel demand is lower than the demand threshold. This conclusion is consistent with the pattern of reality and experience. Therefore, the definition and judgment conditions of demand thresholds, introduced in this study, can provide theoretical guidance when implementing fare incentive policies in aviation and metro networks.

Getting closer to your destination: The role of available surface connections on the supply of low-cost carriers in secondary European tourist airports

Secondary airports have played a key role in the development of both low-cost carriers and the tourism industry in recent decades. Although they are usually further from tourists' main destination/origin, low-cost carriers take advantage of lower fares to exploit tourists' lower time valuation. Nonetheless, efficient surface commuting is a key attribute of airport accessibility and a source of relative attractiveness in multi-airport systems. Low-cost airlines have recently changed their strategic behavior by opting to spread their presence at primary airports, which represents a challenge for secondary airports that have both declining traffic and high dependency on low-cost carriers. In this paper we evaluate the role of private and public transportation commuting time efficiency in the quarterly market share of secondary airports for a sample of European multi-airport systems between 2018 and 2021. Our results show that relative commuting efficiency– whether public or private –is a determinant of traffic distribution in multi-airport systems. Public authorities might be interested in improving secondary airports' accessibility when other airport policies are constrained, either to reverse their current adverse trend or to efficiently utilize existing capacity in systems with highly congested primary airports.

Linkage mechanism of public transport subsidy: considering passenger ridership, cost, fare and service quality

ABSTRACT Under the long-term implementation of the low fare policy for public transport in China, the phenomenon of unsustainable subsidies is increasingly obvious. We take into account three related stakeholders including the public, operators and government, and comprehensively consider various factors affecting public transport subsidies, and establish a linkage mechanism of the subsidy based on passenger ridership, cost, fare and service quality. We propose a combination forecasting model (CFM) composed of quadratic exponential smoothing model (QESM) and Grey theory model (GM) to forecast passenger ridership. The results show that the CFM improves the forecast accuracy of passenger ridership, the factors considered in the linkage mechanism are more comprehensive, and the results are reasonable. By using this linkage mechanism, the government or operators can establish long-term or mid-term development plans to provide a systematic and theoretical reference, which is conducive to the healthy and stable development of public transport.

On the Economic Impacts of Transportation Innovations: A Comprehensive Application to Quantifying the Impacts of an Hyperloop Technology

The purpose of this paper is to quantify the economic impacts associated with an investment in transportation systems. Here, we apply the methodology to projected comprehensive economic impacts of an Hyperloop route. The methodology is a low-frequency economic growth model that includes cumulative gains in real GDP, cost savings and the greenhouse gas savings of the proposed Hyperloop technology. To calibrate the model, we consider a route spanning from Texas to Chicago and covering 1,575 miles across the proposed hyperloop system. The infrastructure investment is obtained from construction cost estimates presented in previous feasibility studies. Our contribution is to present a simple general equilibrium approach to quantifying transportation economic impacts. To our knowledge, our is the first quantitative assessment of the Hyperloop technology. We include an analysis of the public finance aspects of the route, thus adding an answer to the question regarding the national merits of such an investment project. Our findings suggest that for returns comparable to the interstate highway system, the project could be paid for out of the stream of future tax revenues. There are additional gains through lower fares and travel times. Lastly, the environmental gains, especially from reduced air travel, are quantitatively significant.