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Competitive fare and frequency effects in airport market share modeling

Author

Listed:
  • Cohas, François J
  • Belobaba, Peter P
  • Simpson, Robert W

Abstract

Previous efforts to model the distribution of passenger traffic between airports in a multi-airport system have focused on ‘catchment areas’ associated with competing airports, which generally do not change in the short to medium term. Since deregulation of US airline markets, however, there have been substantial shifts in airport market shares as a result of changes in relative airline fares and service frequency at competing airports serving the same metropolitan area. In this paper, we develop and estimate an airport market share model based on the dynamics of airline pricing and frequency decisions, which can in fact vary dramatically over time. We argue that the distribution of traffic between competing airports is modeled most correctly at the level of the origin-destination market, as a function of relative fares charged by airlines at each airport and the effective frequency of service in the O-D market from each airport. The statistical estimation of price and time elasticities for several case studies demonstrates the importance of including these airline supply decisions in the modeling of airport market shares.

Suggested Citation

  • Cohas, François J & Belobaba, Peter P & Simpson, Robert W, 1995. "Competitive fare and frequency effects in airport market share modeling," Journal of Air Transport Management, Elsevier, vol. 2(1), pages 33-45.
    • Handle: RePEc:eee:jaitra:v:2:y:1995:i:1:p:33-45
    DOI: 10.1016/0969-6997(95)00025-7
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    Citations

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    Cited by:

    1. Grubesic, Tony H. & Wei, Fangwu, 2013. "Essential Air Service: a local, geographic market perspective," Journal of Transport Geography, Elsevier, vol. 30(C), pages 17-25.
    2. Yang, Zhongzhen & Yu, Shunan & Notteboom, Theo, 2016. "Airport location in multiple airport regions (MARs): The role of land and airside accessibility," Journal of Transport Geography, Elsevier, vol. 52(C), pages 98-110.
    3. Daniel Strobach, 2006. "Competition between airports with an application to the state of Baden-Württemberg," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 272/2006, Department of Economics, University of Hohenheim, Germany.
    4. Vowles, Timothy M., 2001. "The “Southwest Effect†in multi-airport regions," Journal of Air Transport Management, Elsevier, vol. 7(4), pages 251-258.
    5. Fu, Qian & Kim, Amy M., 2016. "Supply-and-demand models for exploring relationships between smaller airports and neighboring hub airports in the U.S," Journal of Air Transport Management, Elsevier, vol. 52(C), pages 67-79.
    6. Obeng, K., 2008. "Airline daily fare differentiation in a medium-size travel market," Journal of Air Transport Management, Elsevier, vol. 14(4), pages 168-174.
    7. Cho, Woohyun & Windle, Robert J. & Dresner, Martin E., 2015. "The impact of low-cost carriers on airport choice in the US: A case study of the Washington–Baltimore region," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 81(C), pages 141-157.
    8. Vikrant Vaze & Cynthia Barnhart, 2012. "An assessment of the impact of demand management strategies for efficient allocation of airport capacity," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 6(1/2), pages 5-27.
    9. Loo, Becky P.Y., 2008. "Passengers’ airport choice within multi-airport regions (MARs): some insights from a stated preference survey at Hong Kong International Airport," Journal of Transport Geography, Elsevier, vol. 16(2), pages 117-125.
    10. Lieshout, Rogier & Malighetti, Paolo & Redondi, Renato & Burghouwt, Guillaume, 2016. "The competitive landscape of air transport in Europe," Journal of Transport Geography, Elsevier, vol. 50(C), pages 68-82.
    11. de Luca, Stefano, 2012. "Modelling airport choice behaviour for direct flights, connecting flights and different travel plans," Journal of Transport Geography, Elsevier, vol. 22(C), pages 148-163.
    12. Yetiskul, Emine & Matsushima, Kakuya & Kobayashi, Kiyoshi, 2005. "Airline Network Structure with Thick Market Externality," Research in Transportation Economics, Elsevier, vol. 13(1), pages 143-163, January.
    13. Kim, Amy M. & Ryerson, Megan S., 2018. "A long drive: Interregional airport passenger “leakage” in the U.S," Tourism Management, Elsevier, vol. 65(C), pages 237-244.
    14. Paliska, Dejan & Drobne, Samo & Borruso, Giuseppe & Gardina, Massimo & Fabjan, Daša, 2016. "Passengers' airport choice and airports' catchment area analysis in cross-border Upper Adriatic multi-airport region," Journal of Air Transport Management, Elsevier, vol. 57(C), pages 143-154.
    15. Lieshout, Rogier, 2012. "Measuring the size of an airport’s catchment area," Journal of Transport Geography, Elsevier, vol. 25(C), pages 27-34.
    16. Robert Malina, 2005. "Market power and the need for regulation in the German airport market," Working Papers 10, Institute of Transport Economics, University of Muenster, revised Mar 2006.
    17. Wen, Yuh-Horng & Hsu, Chaug-Ing, 2006. "Interactive multiobjective programming in airline network design for international airline code-share alliance," European Journal of Operational Research, Elsevier, vol. 174(1), pages 404-426, October.
    18. Wei, Fangwu & Grubesic, Tony H., 2015. "The dehubbing Cincinnati/Northern Kentucky International Airport (CVG): A spatiotemporal panorama," Journal of Transport Geography, Elsevier, vol. 49(C), pages 85-98.

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