The Air Transportation Industry: Economic Conflict and Competition

Front Cover
The Air Transportation Industry
Contemporary Issues in Air Transport
The Air Transportation Industry: Economic Conflict and Competition
Copyright
Contents
List of contributors
Preface
1 - Economic structure of the air transport business
1. Introduction
2. The market structure: highly competitive and heterogeneous
2.1 The market structure
2.2 Size order of market parties: turnover, money, and power
2.3 The interdependence and market power
3. Evolution toward new business models
4. Possible conflict situations within and between actors
4.1 Airlines
4.2 Aircraft manufacturers
4.3 Airport operators
4.4 Handling companies
4.5 Relations with the government
5. Conclusions
References
2 - The burden of a ton CO2! Emission trading systems and the air transport business
1. Introduction
2. The global challenge of climate change and CO2 emissions
3. Overview of global policies to address climate change
4. Air transport industry traffic and CO2 emissions
4.1 Historical development
4.2 Projections
5. Policies to address CO2 emissions from international air transport
6. Measures available to reduce air transport CO2 emissions
6.1 Technological developments
6.2 New standards
6.3 Airline operations
6.4 Air navigation service provider' operations
6.5 Sustainable aviation fuels
6.6 Market-based measures
6.7 Comparison of measures
7. Carbon Offsetting and Reduction Scheme for International Civil Aviation (CORSIA)
8. Analysis of the supply and demand for carbon offsets for CORSIA
9. The impact of CORSIA on air traffic and airline financial results
9.1 Assumptions and brief model description
9.2 Results
9.3 Analysis
10. Conclusion
References
Further reading
3 - Labor in the aviation industry: wages, disputes, and shocks
1. Introduction
2. Employment in the aviation industry
3. Wage determination
4. Monopsony (the power of the employers)
5. Monopoly (the power of the unions)
6. Bargaining power
6.1 Elasticity of demand
6.2 Elasticity of supply
6.3 Competition in the aviation market itself
7. Industrial action
8. Economic shocks
9. Conclusions
References
4 - The air transportation vertical channel, the global value added, and the role played by private versus public c ...
1. Introduction
2. The air transportation vertical channel
3. The aircraft manufacturers
4. The engine manufacturers
5. The leasing companies
6. The handlers
7. The distribution: GDS and others
8. Airports
9. Airlines
10. Conclusions
References
5 - Exogenous shocks on the air transport business: the effects of a global emergency
1. Introduction
2. Impact of COVID-19 on the airline business—the worst crisis since ever
2.1 Air transport demand hugely impacted
2.2 Deep impact on operating model: resources' productivity and aircraft capacity
2.3 Immediate reactions from the vast majority of the operators: fleet and capacity reductions
3. A new era of nationalization?
3.1 The financial support to traditional flag carriers
3.2 A new model of nationalized airlines
3.3 How the new market environment impacted—reactions from low-cost carriers
3.3.1 Southwest Airlines
3.3.2 Ryanair
3.3.3 EasyJet
3.3.4 Wizz Air
4. How the industry is going to face the crisis
4.1 How major airlines have been considering to face the mid-term issues
4.2 The reactions of low-cost carriers
5. Conclusions
References
Further reading
6 - The impact of regulation on the airport industry: the Italian case
1. Introduction
2. Airport regulation: a literature review
3. Airport regulation in Italy
4. The empirical analysis
4.1 The average cost function
4.2 The identification approach
5. Data
6. Empirical results
6.1 Baseline
6.2 Robustness checks
7. Conclusions
Appendix
References
7 - Airline pricing, incumbents, and new entrants
1. Introduction
2. Pricing principles: theory and literature
2.1 A fault line in aviation history
2.2 Theoretical foundations of pricing in aviation
2.3 Recent trends in airline pricing
3. Deviant behavior: pricing as a barrier to entry
4. A possible generalization and alternative strategies
5. Conclusions
References
Further reading
8 - The fight for airport slots: the case of Amsterdam Airport Schiphol11The authors have written this chapter on p ...
1. Introduction
2. The EU Slot Regulation
3. The changing context for slot allocation: COVID-19 and the airport capacity crunch
3.1 COVID-19
3.2 Demand growth and the airport capacity crunch
4. The implications for growing excess demand for slots: theory and research findings
5. The implications for growing excess demand for slots: the case of Amsterdam Airport Schiphol
5.1 Stabilizing connectivity
5.2 Seat capacity and load factor
5.3 Transfer traffic
5.4 Full freighter traffic
5.5 The role of slots in retaliatory actions in the aeropolitical arena
5.6 Use of remedies at Amsterdam Airport Schiphol
5.7 Deficiencies of grandfather rights: slot hoarding and babysitting
5.8 Gaming of the new entrant rule
6. Conclusions
6.1 Fixing the current system
6.2 The concept of the super-congested airport
6.3 Market-based measures
6.4 Concluding remarks
References
9 - Different approaches to airport slots. Same results, same winners?
1. Introduction
2. Airport slot allocation approaches in the world and the problems emerging
3. Discussion of the solution alternatives to the problems emerged from allocation approaches
4. Proposal of a new and untraditional auction mechanism for airport slot allocation
4.1 ASAM model architecture
The Institution
The Environment
The Agents' Behavior
The Slot Coordinator
The Airlines
4.2 Adaption of ASAM auction mechanism to internet keyword search auctions
4.3 The conceptual structure of the model and the auction mechanism
5. Analysis of airline agents' bidding behavior in ASAM
5.1 Components of bid price determination
5.2 Determination of bidding strategies and introducing learning mechanisms to airline agents in ASAM
6. Case study: application of ASAM to a synthetic auction market of Heathrow Airport
6.1 Specifications of the auction market
6.2 Experiments and results
7. Discussion of the proposed model ASAM and results
Network effects
8. Conclusions
Acknowledgments
References
10 - Black swans or gray rhinos on the runway? The role of uncertainty in airport strategic planning
1. Introduction and research questions
2. Increasing year-to-year traffic volatility at airports
2.1 Increased traffic volatility at airports in more competitive air transport markets
2.2 High-impact shock events from outside the air transport system
2.3 Shock events and economic characteristics of airports
3. High-impact shock events and deep uncertainty
3.1 Black Swans or fat tails
3.2 Color blindness regarding swans
4. Absorbing rare, high-impact shock events in airport strategic planning
4.1 Scenarios in aviation
4.2 Scenarios to be integrated in a responsive strategic plan
4.3 Robust airport strategic planning and flexible master planning
4.4 Increasing master plan flexibility
5. Final observations and conclusions
References
11 - Making sense of airport security in small and medium-sized airports
1. Introduction
2. A brief history of air transportation security
3. Regulatory framework
3.1 ICAO
3.2 European Framework
4. Air transport security costs
5. Proportionality of security in airports
5.1 Criticisms to aviation security framework
5.2 Risk based security
5.3 SeMS—security management system
6. A new approach for security in a network of airports
7. Conclusion
Acknowledgments
References
12 - How can airports influence airline behavior to reduce carbon footprints?
1. Introduction
2. Evolution in air transport traffic and impacts worldwide
3. Airports environmental practice and carbon reduction initiatives
4. Challenges in environmental sustainability practice at airports and ways forward
5. Negotiation
6. Good practice recommendations and opportunities
7. Conclusions
References
13 - The measurement of accessibility and connectivity in air transport networks
1. Introduction
2. An overview of air transport accessibility
2.1 The potential indicator
2.2 The daily accessibility indicator
2.3 The location indicator
2.4 The relative network efficiency indicator
3. Air transport accessibility and related concepts
3.1 Accessibility and connectivity
3.2 Accessibility, resilience, criticality, and vulnerability
4. A tentative future research agenda
4.1 Short distances and greener modes
4.2 Intermodality
4.3 ICT
4.4 Equity
4.5 Big data and open sources
5. Conclusions
References
14 - Fighting for market power: the case of Norwegian Airlines
1. Introduction
2. Why did EU deregulation initially not affect the Norwegian domestic airline market?
3. Phases in airline strategic behavior following the deregulation
3.1 The initial period 1994–1998
3.2 Second phase 1998–2002
3.3 Third phase 2002 onward
4. Airport competition
5. The low-cost carrier Norwegian's continued growth strategy
6. Concluding remarks
References
15 - Is privatization of ATC an economic game-changer? Who gains and who loses?
1. Introduction
2. Definitions
3. Literature review
3.1 Commercialization and competition
3.2 Effects of commercialization
3.2.1 Effects on safety and security
3.2.2 Effects on costs
3.2.3 Effects on ANS prices
3.2.4 Effects on service quality
3.2.5 Effects on customer relationships
3.2.6 Effects on government relationship
3.2.7 Effects on labor and capital
4. The emergence of the ANSP business model and its impact on ATM/CNS profits
4.1 Methodology
4.2 Variables influencing the ANSP business model
4.2.1 Strategic choices
4.2.1.1 Operational scope
4.2.1.2 Collaboration strategy
4.2.1.3 Innovation strategy
4.2.2 Asset choices
4.2.3 Governance choices
4.2.4 Strategy outcomes
4.2.4.1 Cost structure
4.2.4.2 Revenue structure
4.3 Business model constructs
4.4 The impact on ATM/CNS profits
5. Conclusions
References
16 - The forwarders' power play effect on competition in the air cargo industry
1. Introduction
2. Freight forwarders in a literature review
3. The business model of the air freight forwarder
4. Concentration in the air freight forwarding industry
5. Freight forwarders at major European cargo airports
6. Conclusions
References
17 - Fuel hedging: how many games can we play?
1. Fuel costs' relevance in aviation
2. Fuel hedging fundamentals
2.1 Instruments
2.1.1 Futures
2.1.2 Derivatives
2.1.3 Long versus short hedging
3. Hedging in reality
3.1 Introduction
3.2 Fuel hedging drivers
3.2.1 Company valuation
3.2.2 Mitigate volatility
3.2.3 Management competence
3.3 Challenges
3.3.1 Contractual costs
3.3.2 Accounting standards
3.3.3 Predictive modeling
3.4 Regional perspective
3.5 Cases
3.5.1 Southwest Airlines
3.5.2 Cathay Pacific Airways
4. Recent developments
5. Conclusions and future outlook
References
18 - The effect of accidents on aircraft manufacturers' competition
1. Introduction
2. Aircraft accidents, aircraft safety, and airline stock prices: a literature review
3. The aircraft manufacturers market: the story of a continuous consolidation
4. Aircraft accidents: a historic overview of air travel from safe to safest way of travel
5. The impact of accidents on aircraft manufacturers' competition
6. Why are airlines so faithful to their chosen aircraft manufacturer?
7. Conclusion
References
19 - How strategy can influence the market: recommendations and conclusions
1. Introduction
2. Market structures
3. Current market structure
4. What will the future bring?
5. Conclusions
References
Further reading
Index
A
B
C
D
E
F
G
H
I
L
M
N
O
P
Q
R
S
T
U
W
Back Cover