Three Essays on Demand and Cost in the U.S. Domestic Airline Industry PDF Download
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Author: Michael Allen Carnall
Publisher:
ISBN:
Category :
Languages : en
Pages : 266
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Author: Michael Allen Carnall
Publisher:
ISBN:
Category :
Languages : en
Pages : 266
Get Book Here
Book Description
Author: Michael Allen Carnall
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Previous research on airline demand has recognized the existence of at least two customer types, business passengers with high valuations of time and low price elasticity, and tourists having low valuations of time and high price elasticity. Attempts to differentiate between these two groups have generally been based on assumptions about the range of fares paid by each group or the classification of specific routes into "tourist" and "business". This research uses a differentiated products supply-and-demand model to disentangle the separate effects of hubs on costs and markups. On the demand side, it attempts to capture the fact that airline customers are heterogeneous by allowing customers' preferences over various product specifications to be drawn from a binary distribution. On the cost side, it estimates a very flexible spoke marginal cost function, so as to allow economies of density to vary across different ranges. Demand is estimated in a nested logit framework using unaggregated data from up to 200,000 products from as many as 18,000 markets per quarter. Markups, and thus marginal costs, are obtained on the basis of the assumption that firms price products to maximize profit in each market. Marginal cost is then estimated as a cubic function of leg distance and density. The model is first applied to data for a single quarter to gain an understanding the nature of the advantages enjoyed by carriers at their hub airports. It is then independently applied to data for the fourth quarters of nine consecutive years in order to elucidate the changes which may have occurred to costs and demands as firms reconfigured their fleets and learned the art of "yield management". Finally, adapted to the analysis of pooled time series data, the model is applied to the fourth quarters of the years 1989 through 1993 in order to determine the affect on demand and cost of the several bankruptcies which occurred during that period.
Author: Lei He
Publisher:
ISBN:
Category : Airlines
Languages : en
Pages : 143
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Author: Zexuan Liu
Publisher:
ISBN:
Category : Aeronautics, Commercial
Languages : en
Pages : 186
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Author: Amirhossein Alamdar Yazdi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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As supported by the dynamic structure-conduct-performance (S-C-P) paradigm, market structure affects conduct, and conduct determines firms' performance (Mckinsey and Company Quarterly, 2008). Several researchers have looked at the S-C-P relationship with focus on price. Boreinstein, 1990; Beutel and McBride, 1992; Kim and Singal, 1993; Morrison, 1996; Veldhuis, 2005; Peters, 2006; Zhang and Round, 2009 looked at the effect of airline mergers on fares; some others have looked at the linkage between the imposition of fees and stock values (Barone, et al., 2012), ticket prices (Henrickson and Scott, 2012; Brueckner, et al., 2015); and some examine the effects of low-cost carriers entry/threat of entry on incumbent fares (Goolsbee and Syverson, 2008; Dennis, 2007). Even though there have been many studies on the impact of mergers/introduction of ancillary fees/low-cost threat on airfares, the linkage to service quality has received very little attention. This study investigates the linkages among market structure, market conduct and service quality in the US domestic airline industry. In this dissertation, provided in three essays, I specifically answer the following three questions. 1- How do mergers and acquisitions affect service quality? 2- How does the introduction of baggage fees affect service quality? 3- How does a threat of entry or an entry of a low-cost carrier affect incumbent service quality and airfare? The first essay studies the relationship between mergers in the US domestic market and service quality, as measured through late flights, mishandled bags, involuntary boarding denials and flight cancellations. The results show that in the immediate years following a merger, service quality generally deteriorates, and that the drop in service is due simultaneously to the merger and the increased concentration of the market. Thus, recent mergers in the US, including Delta and Northwest, United and Continental, Southwest and AirTran, have likely resulted in increased market concentration and decreased service levels. From a public policy perspective, the results point to the importance of regulators monitoring airline actions, such as mergers and acquisitions, that serve to increase the concentration of markets, and may also result in decreased service quality. The second essay examines the linkages between the implementation of baggage fees and late flights in the airline industry directly, and indirectly through passenger demand and adjustment in ticket price. Findings show that baggage fees policies result in improvements in on-time performance as assessed through late flights, directly through improvements in airport-side sorting and loading efficiencies, and indirectly through lower air travel demand. It is further shown that these relationships are contingent upon the presence of a hub airport on a route. The results have important managerial and public policy implications as baggage fees have often been cited as a driver of security queue, aircraft alley, and overhead bin congestions, and ultimately delayed flights. The findings suggest that these suppositions could be misplaced. The third essay conducts a simultaneous analysis of the effects of threat of entry and entry of Southwest on incumbent carriers' on-time performance as well as yield, in the US Airline Industry. The results show that, on average, incumbent carriers' yield and on-time performance decrease in both threat and entry periods; and that the drops in on-time performance and yield are partially linked to each other indirect effect. It is further shown that the effects of entry or threat of entry of Southwest on incumbent carriers depend highly on the general, long run pricing policy and on-time performance of those carriers. Further analysis shows that market concentration plays an exacerbating role; on the concentrated routes, the impacts of threat of entry and entry on on-time performance and yield are more severe. The findings of this study have important managerial and public policy implications as it provides a thorough assessment on incumbent carriers' reactions to threat of entry and entry. The dissertation is based on the following papers: Steven et al, 2016, and Yazdi et al, 2017, and a working paper coauthored by Yazdi and Steven.
Author: Tak Keung Wong
Publisher:
ISBN: 9781267477156
Category :
Languages : en
Pages :
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The third manuscript studies the entry patterns of virtual code-sharing alliances. Specially, I examine the entry patterns of United-US Airways virtual code-sharing alliance. I use a probit model to estimate the reduced-form equation for the entry decisions of virtual code-sharing alliances. The empirical results suggest that Southwest Airlines is not the direct competitor to virtual code-sharing alliances.
Author: Maria Andrea Martens Olivares
Publisher:
ISBN:
Category :
Languages : en
Pages : 268
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Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 668
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Author: Diego Alfonso Escobari Urday
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This dissertation analyzes pricing under uncertainty focusing on the U.S. airline industry. It sets to test theories of price dispersion driven by uncertainty in the demand by taking advantage of very detailed information about the dynamics of airline prices and inventory levels as the flight date approaches. Such detailed information about inventories at a ticket level to analyze airline pricing has been used previously by the author to show the importance of capacity constraints in airline pricing. This dissertation proposes and implements many new ideas to analyze airline pricing. Among the most important are: (1) It uses information about inventories at a ticket level. (2) It is the first to note that fare changes can be explained by adding dummy variables representing ticket characteristics. Therefore, the load factor at a ticket level will lose its explanatory power on fares if all ticket characteristics are included in a pricing equation. (3) It is the first to propose and implement a measure of Expected Load Factor as a tool to identify which flights are peak and which ones are not. (4) It introduces a novel idea of comparing actual sales with average sales at various points prior departure. Using these deviations of actual sales from sales under average conditions, it presents is the first study to show empirical evidence of peak load pricing in airlines. (5) It controls for potential endogeneity of sales using dynamic panels. The first essay tests the empirical importance of theories that explain price dispersion under costly capacity and demand uncertainty. The essay calculates a measure of an Expected Load Factor, that is used to calibrate the distribution of demand uncertainty and to identify which flights are peak and which ones are off-peak. It shows that different prices can be explained by the different selling probabilities. The second essay is the first study to provide formal evidence of stochastic peak-load pricing in airlines. It shows that airlines learn about the demand and respond to early sales setting higher prices when expected demand is high and more likely to exceed capacity.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 398
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