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European airlines conduct after September 11
Abstract
The paper analyses the reorganisation that European carriers have implemented after September 11 in the transatlantic flights. We model carriers’ conduct as a mixture of short- and long-term goals, where the weights depend on firm-specific variables (adjustment costs, financial situation) and subjective expectations on the crisis duration. Data provide some support to our conjectures that high adjustment costs induce low flexibility and a focus on the long-term; and that a bad financial situation shifts the carries attention to short-term. Finally, the analysis of the composition of short- and long-term reaction provides some insights into the carriers’ perspectives of the crisis duration.
... In many scenarios, such 9/ 11, the collapse of Lehman Brothers, or simply the publication of a quarterly report, examining investor behaviour is straightforward, as the event concerned (whether positive or negative) is obviously anchored to a well-defined point in time. The terror attacks on 11 September 2001, for example, have been shown to have had ripple effects in Europe, Asia, and Australia and an instantaneous, direct effect on North America (Alderighi & Cento, 2004;Carter & Simkins, 2004;Drakos, 2004;Flouris & Walker, 2005;Gillen & Lall, 2003;Kim & Gu, 2004). The Ebola and SARS pandemics have mostly had indirect effects on the travel industries of America, Europe, Asia, and Australia (Henderson, 2004;Zeng et al., 2005). ...
... As a result, several carriers have a leverage above 50%, which means that their exposure to external financing is very high. Researchers have pointed out that airlines with higher adjustment costs are less flexible in their reaction to a crisis and their focus is more long-term, whereas airlines in a bad general financial situation shift their focus to the short-term (Alderighi & Cento, 2004). The authors argue that following the 9/11 terrorist attacks, short-term losses were due to a decrease in demand, the cancellation of certain destinations, and the resulting decrease in the number of flights. ...
In addition to social damage, the first wave of the COVID-19 pandemic also caused huge economic losses in the beginning of 2020, especially for companies in the tourism sector. The airline market was no exception. This study examines the significance of the business model of European listed airlines – low cost carriers (LCCs), full service carriers (FSCs) – for stock market performance. We use event study on the 11 airlines included in the sample. In terms of cumulative average abnormal returns, i.e. the most significant deviations from expected returns, negative phases can be detected in the entire and third stage of the pandemic. FSCs performed significantly better than LCCs at the time of the pandemic on 24 February, when European stock markets suffered the most damage; the business model overwrote financial indicators during the toughest period of the crisis. Although most LCCs had higher cash/assets ratios, they still produced worse results than the average performance of companies with lower cash/assets ratios. This analysis helps to ensure that, in addition to examining financial indicators, the enumeration of the business model in this industry can also be decisive. The future possibilities of the research are discussed at the end of the study.
... We already know that traffic and revenues of airline companies are very cyclical, which means that they are closely related to the economic situation (Hätty and Hollmeier, 2003;Button, 2009;Franke and John, 2011). In the last decades, economic and/or geopolitical crises greatly affected the air sector, the most spectacular examples being the first Gulf War in 1991 and the combination of economic crisis and the September 11th terrorist attack in 2001, which of course had a greater impact on the airline industry than on the rest of the economy (Alderighi and Cento, 2004). The current crisis is a new episode in this succession of crises and rapid recoveries, as stated by International Air Transport Association (IATA): ...
... However, again no spatial analysis was undertaken. Alderighi and Cento (2004) focus on the same issue of airline strategies to respond to the crisis but restrict their analyses to European companies in the transatlantic market. They show that companies reduce their capacities through different ways, for instance, by limiting frequencies, using smaller planes, or closing routes. ...
This paper presents a comprehensive analysis of air services dynamics during the recent economic crisis. Through a regression analysis, we show that at the country scale, the change in the supply of seats is highly dependent on economic growth, confirming the cyclical nature of the air sector. Hence the crisis of air services has much more affected the USA, Europe and Japan than the rest of the world. However, many countries deviate from this general trend. In a second step, using the existing literature, we explain some of these deviating figures. National specificities and airline strategies seem to influence the intensity of the crisis. We argue that the intensity of the crisis in the US is due to the structural oversupply of the air sector. Through other cases, especially the Middle East, we show that hubbing strategies might reduce the impact of the crisis, or at least make it less dependent upon local economic dynamics. In contrast with other authors, we found no positive impact of the share of low-cost carriers on the supply during the crisis, despite their success in some specific contexts like between Europe and Morocco.
... For airlines, the impact of the Covid-19 pandemic was especially severe, and the accompanying decision-making problem was exacerbated by the uniqueness of this crisis. The only crisis resembling this pandemic was the reduction in air travel demand following the September 11 attack, but it was much smaller, briefer, and concentrated in the USA (Alderighi & Cento, 2004;Dobruszkes & Van Hamme, 2011;Hätty & Hollmeier, 2003). The Covid-19 pandemic has produced year-on-year reductions of air traffic of 90 percent (on a monthly level) in many nations, and these reductions happened as soon as four months into the pandemic. ...
... At the same time, one should also bear in mind the problems related to the deregulation of the aviation market in the USA and Europe, privatization of the main network air carriers, and competition from low-cost airlines. However, it was COVID-19 that revolutionized the aviation industry in an unprecedented way [10][11][12][13][14][15][16][17][18][19][20][21][22][23]. ...
The COVID-19 pandemic caused a drastic reduction in air traffic passengers, especially
during the period when the EU countries introduced a lockdown. Even after the relaunch of airline operators, passenger traffic did not return to the pre-pandemic trend. The aim of the study was to estimate the difference between the demand that was observed during the pandemic, and the demand that was forecast based on the pre-pandemic trend. The calculations were made for airports in selected EU countries. The first method was seasonality indicators, using quarterly data for 2015–2021. In the multiplicative model of seasonal fluctuations, the method of determining the seasonality indicators was used, based on the quotient of empirical values and the value of the trend. The one-name period trend method was used in the next step, then Fourier spectral analysis was applied. In the context of forecasts for the individual quarters of 2020 and 2021, all models indicate a
further growing trend in the demand for passenger transport, which could have been observed if the COVID-19 pandemic had not occurred. As a result of the pandemic, the number of passengers handled at airports has significantly decreased. In the third quarter of 2021, freight growth was already noticeable, with the exception of Netherland, where a marked decline was recorded.
... Crisis management and emergency planning specifically for tourism is still a relatively new concept within tourism and therefore still not widely theoretically developed (Faulkner, 2001;Blake and Sinclair, 2003;Glaesser, 2003;Ritchie, 2004;Evans and Elphick, 2005;Blackman and Ritchie, 2007;Pforr and Hosie, 2007). Despite the increasing research on crisis in tourism, there is still a limited number of analyses of crisis management in given tourism organisations (Alderighi and Cento, 2004;Gillen and Lall, 2003;Henderson, 2005;Jallat and Shultz, 2011), with tour operators in particular (Čavlek, 2003;Evans and Elphic, 2005). ...
Despite the increasing research on crises in tourism, there are still very few analyses on crisis management in specific organisations. Therefore, the purpose of the research paper is to critically analyse the evolution of crisis management system in tour operating companies in the period 2000-2011. For this purpose a sample of the key risks and crisis types are analysed, and the cases of tour operators' handling specific crises are revealed.
... Lufthansa airline rapidly reduced its flight frequencies on long-haul flights, which helped to stabilize yield and corporate results. Alderighi and Cento (2004) also provide analysis of European carriers in the context of 9/11, focusing on their decision making. They segment the carriers into flexible and non-flexible, where the former are highly responsive and are driven by short-term goals, while the latter are typically driven by long-term goals. ...
This paper examines the determinants of profitability in the U.S. domestic airline industry, segmented into: operations strategy, productivity, and service measures, using quarterly data between 1995 and 2007. The analysis is performed separately on data prior and post 9/11 attack, revealing, among others, that after 9/11 the profitability of full-service carriers is improving faster than that of focused carriers, and that passengers are more forgivable to service glitches after 9/11 or possibly are associating lack of service with the intensified security measures imposed after 9/11. Focusing the analysis on determinants of consumers’ complaints we find further support for these arguments.
... Figures in brackets represent the variation of activity of the aviation sector during these events. The terrorist attacks in New York and Washington had a major impact on the airline industry (Alderighi and Cento, 2004;Ito and Lee, 2005). These attacks caused many travelers 8 These data are not provided on air routes basis. ...
This article proposes an econometric analysis of the demand for mobility in the aviation sector. The role played by different variables (GDP, jet-fuel prices, exogenous shocks, market maturity) on air traffic is estimated using dynamic panel-data modeling. GDP appears to have a positive influence on air traffic, whereas Jet-Fuel prices have a non-linear effect on air traffic. Our analysis shows that the magnitude of the influence of these air traffic determinants differs widely among regions. Then, we use our model to predict the evolution of air traffic until 2025. According to our main scenario, air traffic should be multiplied by a factor of two between 2008 and 2025 at the world level, corresponding to a yearly average growth rate of 4.7% (ranging from 3% in North America to 8% in China, at the regional level) expressed in RTK.
... results. Alderighi and Cento (2004) also provided analysis of European carriers after September 11. Their decision making are as a mixture of short-and long-term goals, where the weights depended on firm-specific adjustment costs and financial situation. ...
... Geopolitical crises including wars affect the air transport sector. Perhaps, the most extreme example being the September 11th terrorist attack in 2001 in the US, which of course had a greater impact on the aviation industry than on the rest of the economy (Alderighi and Cento, 2004). The Middle East provides plenty of examples on the impact of conflicts on the air transport market. ...
Air transport is considered a cyclical industry sensitive to the macro-environment in which it operates. As aviation policy makers and regulators strategically plan for their future, they need to consider the systematic and synergistic effects of common factors which comprise the operating environment of the industry׳s organisations. Thus, during the process of aviation systems planning governments should perceive the generic conditions which exist in the economy as a whole as equally important to air transport exclusive conditions. This paper highlights the significant impact of the national macro-environment factors on a country׳s air transport sector and it suggests including these elements within the context of civil aviation strategic planning. Country level data is collected on seventeen input variables versus four output variables on a sample of 52 countries. Structural Equation Modelling (SEM) is used to identify the descriptors with significant impact on air transport output, namely: passenger traffic, aviation total contribution to GDP, aviation total contribution to employment and air connectivity levels. The identified significant drivers are found to create an enabling environment that determines the capacity of an economy and society to benefit from the air transport system׳s productivity. The results call upon aviation policy makers and regulators to assess the national macro-environment forces during the situation analysis part of the strategic planning process. The identified operating environment conditions act as a framework for providing clear policy orientations and for facilitating the identification of areas where policy intervention could improve air transport sector׳s performance. A well-defined aviation strategy allows aviation policy makers to identify and address nation wide strategic issues and provides aviation industry׳s stake holders with guidelines to help maintain and enhance their competitive position in both domestic and global markets.
... The literature created the concept of the 9/11 effect which has been studied in depth, as have all the possible variables affected, to the point that it is, today, the fullest analysis ever done of an air disaster. We therefore find studies on the effect of 9/11 on airlines (Alderighi and Cento, 2004;Gillen & Lall, 2003); airport management (see Coy, 2005 on the effect of 9/11 on flight punctuality) and traffic evolution (Abdelghany & Guzhva, 2010;Guzhva & Pagiavlas, 2004;Hätty & Hollmeier, 2003;Lai & Lu, 2005). The main conclusion was that although there were major effects initially, with time these would become insignificant. ...
This paper analyses the effects that the largest aviation accident in Spain in the last 25 years affected decisions by potential passengers. There evidence is of a long-lasting “Rainman effect”, with passengers penalising the airline involved with a 20% long-term reduction in traffic. There were also substitution effects towards other means of transport at Madrid-Barajas, where the accident happened, although these were limited in time. There have been no significant effects on other companies or on the total traffic at the aeroplane's destination airport, Las Palmas de Gran Canaria (Canary Islands), where there are no comparable substitutes for air transport.
... Some evidence has been obtained about the responses to tourism crises by firms which undertake specific types of tourism activities. These include restaurants (Green, Bartholomew & Murmann, 2004), travel agents (Lovelock, 2003), small and micro tourism businesses (Cushnahan, 2004), hotels (Israeli & Reichal, 2003) and airlines (Ray, 1999;Gillen & Lall, 2003;Alderighi & Cento, 2004). However, little research has been undertaken to quantify the magnitude of the effects of tourism crises with few exceptions, for example, , Blake, Sinclair and Sugiyarto (2003), and Blake et al. (forthcoming). ...
Effective crisis management requires information about the ways in which tourists of different nationalities respond to different types of crisis. This paper provides a model which can be used to quantify such effects. The model is applied to the case of American, French and German tourism demand in Scotland. The results show that French tourists were particularly affected by the foot and mouth disease crisis. Germans were most severely affected by the September 11 events. Although arrivals from the USA decreased after both crises, receipts were hardly affected.
... exogenous shocks. External negative events and crisis situations, such as the Persian Gulf crisis during 1990 - 1991, the September 11th terrorist attacks, the wars in Afghanistan and the Arabian Gulf, and the Severe Acute Respiratory Syndrome (SARS) outbreak, have certainly had a significant impact on the demand for air travel (Alderighi and Cento, 2004; Annelies, 2006; Coshall, 2003; Coy, 2005; Gillen and Lall, 2003; Inglada and Rey, 2004; Lai and Lu, 2005; Lee et al., 2005; Mason, 2005; Rossiter and Dresner, 2004). Due to the nature of services in the transportation industry, accurate forecasts of demand and impact assessments of exogenous changes or extreme events are crucial for better management and planning of services, and are something which governments, academics , and practitioners cannot ignore. ...
All around the world, air travel has become a vital element in people's lives, one that stimulates national economies, global trade and tourism. Nevertheless, the airline industry is highly vulnerable to exogenous shocks. The objectives of this study, therefore, are to apply Autoregressive Integrated Moving Average (ARIMA) with intervention model (also known as intervention analysis) to evaluate the impact of different local, regional and global incidents of a man-made, natural and health character, in Taiwan over the last decade. The incidents used in this study are the Asian financial crisis starting in mid-1997, the September 21st earthquake in 1999, the September 11th terrorist attacks in 2001, and the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003. Empirical results revealed that the SARS illness had a significant impact, whereas the Asian economic crisis, the September 21st earthquake, and the September 11th terrorist attacks showed no significant effect on air movements. Based on the results, implications and recommendations are provided, and future research possibilities are also noted.
... The responses of particular sectors to crises are also examined in the literature. For example, Alderighi and Cento (2004) and Gillen and Lall (2003) consider the practices of airlines in relation to crises, with Ray (1999) and Henderson (2003) focusing particularly on the lessons to be drawn from the airline industry with respect to their management of strategic communications at times of crisis. With regard to the hospitality sector, Israeli and Reichal (2003) and Chien and Law (2003), for instance consider crisis management practices in relation to Israeli hotel experiences and SARS in Hong Kong, respectively, and Henderson (2002) focuses on the role of national tourism organisations in managing crises. ...
Tourism is particularly prone to external shocks, which by their nature are unpredictable and need to be addressed through effective crisis management processes. The paper reviews the literature relating to crisis management in tourism and identifies and briefly critiques several models that have been developed to help managers in their strategic planning for such contingencies. The terrorist attacks of ‘9/11’ are used as an exemplar of the type of external shock that can lead to crisis if travel industry managers fail to take immediate and decisive action. This paper discusses the reactions of leading UK based tour operators to the terrorist attacks and a case study is presented to examine the reaction of a particular company to ‘9/11’ and to review the ‘turnaround’ strategies used. The crisis management process model is compared and contrasted with the steps actually undertaken at the company. It is evident that there are wider lessons for the travel industry including the need to: integrate crisis management with strategic planning processes, prepare detailed contingency plans, define decisional roles and responsibilities, and to retain a degree of flexibility. Copyright © 2005 John Wiley & Sons, Ltd.
... Since 2000, output has increased exponentially to the point where crisis and disaster management is emerging as a distinct sub-field within the literature, replete with specialised texts (Beirman, 2003;Glaesser, 2003;Hall, Timothy, & Duval, 2003) and integrated strategic planning and management models and frameworks that attempt to facilitate the improved anticipation, prevention, protection against, and/ or recovery from various types of natural and humaninduced disasters (Evans & Elphick, 2005;Faulkner & Vikulov, 2001;Glaesser, 2003;Prideaux, 2003;Ritchie, 2004;Sharpley, 2005). Specific sectors of the tourism system, such as airlines (e.g., Alderighi & Cento, 2004), hotels (e.g., Henderson & Ng, 2004;Higgins, 2005), travel agencies (Evans & Elphick, 2005) and national tourism organisations (Henderson, 2002), have also been considered. ...
New Hampshire's Old Man of the Mountain illustrates the concept of attraction residuality, wherein a destroyed iconic tourist site is reinvented as a residual attraction through a process of selected ex situ reconstruction and memorialisation. Various mechanical and social reproduction strategies characterise the latter component, including the construction of an off-site full-scale replica and the declaration of a commemoration day and annual awards. Applied more broadly into a specialised disaster planning framework, attraction residuality options can be expanded to include redefinition of the unaltered nucleus and in situ reconstruction of the original icon.
... Since 2000, output has increased exponentially to the point where crisis and disaster management is emerging as a distinct sub-field within the literature, replete with specialised texts (Beirman, 2003;Glaesser, 2003;Hall, Timothy, & Duval, 2003) and integrated strategic planning and management models and frameworks that attempt to facilitate the improved anticipation, prevention, protection against, and/ or recovery from various types of natural and humaninduced disasters (Evans & Elphick, 2005;Faulkner & Vikulov, 2001;Glaesser, 2003;Prideaux, 2003;Ritchie, 2004;Sharpley, 2005). Specific sectors of the tourism system, such as airlines (e.g., Alderighi & Cento, 2004), hotels (e.g., Henderson & Ng, 2004;Higgins, 2005), travel agencies (Evans & Elphick, 2005) and national tourism organisations (Henderson, 2002), have also been considered. ...
In May, 2003, hikers in Franconia Notch State Park in the White Mountains of New Hampshire, USA, observed that the Old Man of the Mountain, the state's iconic 12m granite rock face symbol and primary tourist attraction, had collapsed due to centuries of geological weathering and disintegration. While the sudden and unexpected loss of a regionally iconic tourist attraction is a notable crisis-inducing occurrence in its own right, the management and planning response has proven especially interesting because of its ad hoc focus on maintaining the Old Man tourism brand despite the demise of the actual attraction. The case study demonstrates how this perpetuation-focused response gives rise to the idea of the idea of 'attraction residuality', a term coined by the authors to describe the process whereby destroyed attractions of an iconic nature are reinvented as residual attractions through selected ex situ reconstructions and memorializations. The latter may occur through various strategies of mechanical and social reproduction. Selected case studies inform this concept and its incorporation into a specialized disaster planning framework. Yes Yes
... The major hubs have strengthened their position in recent years as previously significant competitors such as Swiss, SAS and Sabena have lost ground. BA has transferred Gatwick flights to Heathrow and Air France now has a minimal long-haul presence at Orly. Alderighi and Cento (2004) consider how different airlines have reacted to the down-turn in demand post 9/11. The mid-size players look to be the most exposed. ...
In recent years there has been tremendous interest in the growth of low-cost airlines in Europe operating from regional and secondary airports. These have been entirely in the short-haul sector, however. Intercontinental services remain dominated by a few large airports such as London Heathrow, Frankfurt, Paris CDG and Amsterdam. This paper examines the recent development of long-haul services and shows that some of the medium sized European airports have seen their network reduced in the last decade, while it also appears more difficult to replicate Ryanair’s use of obscure minor airports in the long-haul arena. Possible means of providing long-haul links to European regional airports are examined. Continental Airlines is launching new routes from New York to places such as Belfast and Bristol with the Boeing 757 offering around 150 seats. These obviously depend upon the hub feed at the US end to gather a much wider range of North American destinations together. Emirates has ambitious plans to serve more European airports from its rapidly growing hub at Dubai. Already it offers the only eastbound long-haul flight out of Scotland (Glasgow-Dubai). Routes between smaller airports catering for the visiting friends and relatives market have developed where there has been historical migration. These are typically at low frequencies. Canada has services from Europe such as Cardiff-Toronto and Lyon-Montreal. Hamburg has a link to Accra in Ghana, Las Palmas (Canary Islands) to Havana, Cuba and Birmingham to Ashgabat in Turkmenistan. In some cases it is possible to support a service through a second stop in Europe (e.g. Lisbon-Porto-Caracas). Low frequency services are also to be found catering for the holiday market such as to Florida or the Caribbean (e.g. Dusseldorf-Orlando). In the absence of any direct long-haul service, connections via a European hub are necessary to access intercontinental points from regional airports in Europe. International alliances between airl
We study the entry and exit strategy of low-cost carriers into the Italian aviation market during the early stage of their expansion. We find that their strategy is mainly driven by population size, GDP per capita, tourism vocation of the area, and degree of competition, although the direction and magnitude of these factors change over time. At the beginning, low-cost carriers mostly focus on tourist routes, scantly served by full-service carriers; after 9/11 terrorist attack, they shift to richer destinations; and, when the tourism sector regains momentum, they switch again on leisure routes and also expand their presence on routes operated by full-service carriers. As 9/11 terrorist attack led to a permanent change in the entry and exit strategy of low-cost carriers, our analysis suggests that other global crises, such as the COVID-19 pandemic or the Russia-Ukraine conflict, are bound to provoke significant and long-lasting effects in the low-cost carriers developing strategy.
Purpose
The purpose of this paper is to examine crisis management practices among gambling-related hospitality business stakeholders (GBSs) during the coronavirus disease 2019 (COVID-19) pandemic.
Design/methodology/approach
An online survey was administered to a sample of GBSs resulting in 64 completed surveys. The survey explored the COVID-19 crisis using a three-phase framework: preparedness (prior experience and response plans), response (level of importance and use of crisis practices) and future (confidence in recovery, beliefs about consumer behavior and new strategies). Independent-samples t -tests were conducted to investigate the influence of preparedness variables on crisis management capabilities. Importance-Performance Analysis was used to evaluate GBSs' crisis management capabilities and identify where performance might be improved. Factor analyses were employed to explore groupings of response practices as well as future strategies.
Findings
Prior experience had a significant impact on GBSs' crisis management. IPA indicated gaps between the importance GBSs assign to response practices and their corresponding level of use, specifically for those related to marketing and government. Factor analysis revealed response practices did not group according to the questionnaire's four themes, instead, three themes of marketing, efficiency and expenses were revealed. Prevention and hygiene emerged as dominant themes with respect to future strategies.
Originality/value
This is a timely study that investigates crisis management among GBSs during the COVID-19 pandemic. It provides important methodological contributions as well as valuable practical considerations for gambling-related hospitality businesses.
Küreselleşmenin siyasette ve ekonomide önemli bir çıkmazın eşiğinde bulunduğu bir dönemde, 11 Eylül terörist saldırıları gerçekleşmiştir. Söz konusu saldırıları bir dizi siyasi ve askeri gelişme izlemiştir. Gelişmelerin hava taşımacılığına da ekonomik etkileri olmuştur. Ayrıca küresel havacılıkta yeni ve farklı güvenlik algılamaları ortaya çıkmıştır. Bu çalışmanın amacı, bir olgu olarak 11 Eylül terörist saldırılarının küresel sonuçlarının, Dünya havacılık güvenliğine getirdiği yeni bakış açısını ve 11 Eylül sonrası dönemde havacılıkta uluslararası işbirliğindeki değişim sürecini incelemektir.
The aviation industry has registered 4-6% growth and faced one of the biggest booms in its history in the form of worldwide increases in GDP and a greater demand for travel resulting from globalization. The market deregulation in the US in 1978 mainly affected the network strategy of carriers, with numerous 'trunkline' carriers rapidly reviving their network structures from a point-to-point (PP) system into a hub-and-spoke (HS) system. The low-cost carriers experienced fast growth after 1999 and often compete with the full-service carriers on the same routes and for coincident segments. The competitive pressure associated with the evolution of low-cost models affected the traditional airlines models. The liberalization process which started in the EU during the 1990s and the succeeding boom of the low-cost carriers. This process has radically modified the competitive environment where traditional airlines operate.
Scheduled air transport services connect airports throughout the world and thereby enable interaction on a global scale. By doing so, they spur globalization (Hummels, 2007) as well as social and economic development (Lakshmanan, 2011). In order to facilitate integration of regions into global value chains, planners, scholars and policymakers therefore need to
understand as to how scheduled air transport services link a region to other markets. For this purpose, connectivity metrics have been developed, which measure the degree of connections between airports (Burghouwt, Redondi, 2013). In particular, the ‘connection quality-weighting’ approach (Veldhuis, 1997; Burghouwt, de Wit, 2005) has been used to compute the aggregate
quality of all available connections at an airport with regard to their properties in quickly bridging distances. However, such a metric has neither been calibrated on the basis of observed passenger behavior nor been computed for the world’s airports across a multi-decade time series. This paper sets out to develop the first such metric and to discuss global airline network
development between 1990 and 2012 from a connectivity perspective.
Recent situation with wars, terrorism attacks, climate defrost and other natural and unnatural disasters determine the rise of tourism crises all over the world. Wars, terrorism and catastrophes force to think about reduced tourism condition in problematic regions. Nature elements, such as hurricanes, floods, fires, volcanic eruption do a bigger damage to image of the place than for its infrastructure. Accomplished analysis of literature allows us to formulate the aim of this article – to generalize and to distinguish the means for restoring the attractiveness of tourism destination after crisis, based on scientific research results. Decline of tourism development after some natural or unnatural disasters is proven by the experience of many effects of crises (Sharpley, 2005: 75). There are many examples, showing that disasters have a bad influence on tourism. Trying to reveal the damage done for tourism and to find the possible ways of tourism revival, we need to explore theoretical marketing decisions for tourism development and to provide the list of means for restoring the attractiveness of tourism destination.
This article provides jet fuel demand projections at the worldwide level and for eight geographical zones until 2025. Air traffic forecasts are performed using dynamic panel-data econometrics. Then, the conversion of air traffic projections into quantities of jet fuel is accomplished by using a complementary approach to the 'Traffic Efficiency' method developed previously by the UK Department of Trade and Industry to support the Intergovernmental Panel on Climate Change (IPCC, 1999). According to our main scenario, air traffic should increase by about 100% between 2008 and 2025 at the world level, corresponding to a yearly average growth rate of 4.7%. World jet fuel demand is expected to increase by about 38% during the same period, corresponding to a yearly average growth rate of 1.9% per year. According to these results, energy efficiency improvements allow reducing the effect of air traffic rise on the increase in jet fuel demand, but do not annihilate it. Jet fuel demand is thus unlikely to diminish unless there is a radical technological shift, or air travel demand is restricted.
This article compares the impact of the September 11th terrorist attacks and its after-effects on airline demand in the Australia, Canada, Europe, Japan and the US. Using a variety of time-series data, we compare how changes in risk perception following the attacks impacted domestic and international demand. Moreover, we decompose the terrorist attacks' effects into their transitory and ongoing components on airline demand.
The paper examines the heterogeneity with respect to the impact of a financial reform - Activity Based Financing (ABF) - on hospital efficiency in Norway. Measures of technical efficiency and of cost-efficiency are considered. The data set is from a contiguous ten-year panel of 47 hospitals covering both pre-ABF years and years after its imposition. Substantial heterogeneity in the responses, as measured by both estimated and predicted coefficients, is found. Rank correlations between the estimated/predicted coefficients of the ABF dummy and the pre-ABF/post-ABF efficiencies are examined. Overall, improvement seems to be more pronounced in technical efficiency than in cost-efficiency.
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This paper deals with the analysis and modelling of behaviour of the Western European airlines during the first phase of the gradual liberalisation of the EU (European Union) aviation market. The framework for monitoring this behaviour and appropriate methodology for registering significant changes in the airline industry, specific airlines, and the aviation market itself has been developed. Three classes of empirical models have been estimated: airline growth and financial performances, airline mergings and alliances by holding of equity stakes in partners, and airline relationships (cooperation and/or competition) on the EU air route network consisting of five sub-models. The EU airline sub-models are: market share, market concentration, air travel demand, quality of services, and pricing policy. The least-square regression technique has been applied over the cross-sectional data for making the empirical estimates.
We analyze the capacity expansion behavior of firms in a duopoly faced with an uncertain new market. The market demand may be high or low with a given probability mass function. Firms obtain private information about the market size and build their capacity before the market demand is known. Once the demand is revealed, firms enter a capacity constrained price competition phase which determines their revenues. Two scenarios are considered: first, when firms choose their capacities simultaneously in the investment phase, and second, when they do so sequentially. For each case, we determine the unique symmetric Nash equilibrium. Excess capacity can occur in equilibrium in the industry. It is seen that preempting the competitor in the capacity expansion phase offers first mover benefits. We argue that the sequential moves game is more prone to equilibrium excess capacity compared to the simultaneous case. We show that preemption is a good strategy if the investing environment is either highly optimistic or highly pessimistic. If the industry outlook is only moderately optimistic, a capacity planner is still better off preempting his competitor, however, the industry may encounter overcapacity as a consequence.
The investment decisions and profitability of airlines encompasses elements such as air traffic forecasting, the cycles of orders and deliveries, profit cycles, airline growth and survivability in Asia. Regression analysis showed that air traffic growth rates are positively associated with GDP growth rates. The study of the cycles of aircraft orders and deliveries reveal that Asian carriers usually place orders for new aircraft a year after making good profits and these aircraft are delivered after 2–3 years. The delivery of aircraft results in over-capacity, and the decrease in load factors depresses airline profits. Economic cycles are amplified in the industry by capacity investments. The Markov Model was adapted to test the relationship between airline growth and profitability and to predict the survival probabilities of Asian carriers. The results of the study indicate that an airline's growth and profitability are positively related. The survival probabilities of airlines increase as asset size and profits increase. The key implications for Asian airlines are to improve their forecasting techniques, capacity flexibility and responsiveness to the changing environment.
Since the Third Package in 1993, European Union (EU) registered airlines have been able to purchase majority ownership of other EU carriers and set up airlines in other EU countries. This paper investigates how European majors have responded to the liberalised policy, especially European Commission Regulation 2407/92. It goes on to analyse the impact of these strategies for airlines and the EU–US relationship in terms of airline alliances. It concludes that British Airways and the SAirGroup have pursued a policy of acquiring airlines in EU countries, with the former finding it an expensive and questionable strategy, and the latter disastrous.
For those institutions which finance the aerospace industries, it is useful to estimate what the consequences will be of the present liberalisation process which has beset the European airline industry. Consequently ABN AMRO Bank is in the process of developing a model which analyses those factors which are crucial to the survival of an airline. These so called critical success factors appeared to be: financial strength, cost structure, domestic market, size of operations, internationalisation and political support. When we applied these factors to the European airline industry, we found that only a limited number of airlines stand a fair chance of surviving the anticipated restructuring process as an independent carrier. Several carriers will either have to merge with stronger partners or they face bankruptcy. Based on the critical success factors, the larger northern carriers enjoy the strongest positions. From amongst the southern airlines, those with a large domestic market and strong political support have a chance to survive, provided they will be able to adjust their cost structure in time.
Recent research has found that the entrance of a low cost carrier leads to lower prices on routes it has entered. This paper extends this analysis by examining the impact of route entry by a discount carrier, ValuJet into an established carrier’s hub, Delta, and by examining price changes on routes not entered by the low cost carrier. We found that Delta lowered its fares on competitive routes terminating in Atlanta and on routes flowing through its Atlanta hub in response to competition by ValuJet. We did not find evidence that Delta increased fares on non-competitive routes (either those terminating in Atlanta or flowing through Atlanta) to compensate for lost revenues on the competitive routes. This final result runs counter to the conjectures of the DOT and supports the argument that firms practice rational economic pricing in their hub-and-spoke networks. ©
This article presents a European view of the global airline crisis in 2001/2002. The underlying cyclical nature of the airline business and flexibilization as a strategy to manage the cycles are described. Crisis management at Lufthansa German Airlines following the terrorist attacks of September 11, 2001 is discussed in depth. In Europe, the slump in air traffic demand was soon matched by an industry-wide capacity reduction. Reduced overcapacity helped to stabilize yields and corporate results. However, managing the current crisis does not only aim at restoring the pre-crisis state, but rather at forming a more healthy business environment.
There is a large literature on the international transmission of financial and other economic crises. This paper borrows from macroliterature to study an industry specific issue. It examines the impact of an industry specific real shock on firms within that industry, but in countries other than the crisis. In particular, it examines the impact of the events of September 11, 2001 on the market value of non-US airlines. In addition is attempts to identify both graphically and statistically, the importance of trade linkages and airline alliances in the international transmission of shocks.
This article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline. The results indicate that an airline's share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost. The high markups of a dominant airline, however, do not create much of an "umbrella" effect from which carriers with smaller operations in the same markets can benefit. The article suggests a number of possible explanations for this asymmetry.
Bertrand's model of oligopoly, which gives perfectly competitive outcomes assumes that: (1) there is competition over prices and (2) production follows the realization of demand. We show that both of these assumptions are required. More precisely, consider a two-stage oligopoly game where, first, there is simultaneous production, and second, after production levels are made public, there is price competition. Under mild assumptions about demand, the unique equilibrium outcome is the Cournot outcome. This illustrates that solutions to oligopoly games depend on both the strategic variables employed and the context (game form) in which those variables are employed.
In this paper, the authors analyze a restricted class of equilibria in the dynamic model of J. P. Benoit and V. Krishna (1987) in which firms choose their scale of operation before engaging in a repeated game of price competition. Benoit and Krishna established that all firms carry excess capacity in all collusive equilibria. As the authors are interested in the relationship between excess capacity and collusion in price, they examine equilibria in which firms tacitly collude in price, but not in investment decisions. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
This paper considers the effect of an airline's scale of operation at an airport on the profitability of routes flown out of that airport. The empirical methodology uses the entry decisions of airlines as indicators of underlying profitability; the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city-pair profitability. These estimates imply that city-pair profits increase in airport presence and decrease rapidly in the number of entering firms. The literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms. Copyright 1992 by The Econometric Society.
Airline strategy in the
- H Hätty
- S Hollmeier
Hätty H. and S. Hollmeier, 2003, Airline strategy in the 2001/2002 crisis—
the Lufthansa example, Journal of Air Transportation Management, 9(1),
51-55.
We exclude Mexican destinations due to the specificity of this market. The destinations are
- U S Only
In our analysis, we define North America as Canada and US only. We exclude Mexican
destinations due to the specificity of this market. The destinations are: New York, Chicago,
Newark, Toronto, Washington, Atlanta, Los Angeles, Boston, Miami, San Francisco.
20 Those are: Air France, Alitalia, British Airways, Aer Lingus, KLM, Iberia, Lufthansa,
Scandinavian Airlines and Swiss (Air).
Development in air transportation
- Chin
Liberalisation of European Aviation
- Janic