| Summary |
Kuo-Chun Hsiao,2007.07
Department of Transportation Technology and Management National Chiao Tung University
The advantage of the low-cost carrier over established full-service carriers on the fare, cost savings and high aircraft utilization represents an evolution of the airline industry all over the world. Though passenger intention to travel via low-cost carriers may be increased due to the low fare, the extent depends on socioeconomic characteristics, spatial variations and trip distributions of passenger demand in the regional market, which further influence total demand on low-cost carriers. Moreover, the decisions on fare, flight frequency and airport selection affect the cost and quality of airline services. A profit-maximizing low cost carrier must investigate the impacts of passenger characteristics of regional markets on the demand and trade-off between the cost of providing the service and the revenue generated by the service, when determining the fare, flight frequency and airport. The proposed study attempts to explore above issues by formulating a series of models.
This study attempts to apply disaggregate choice model, analytical approach and mathematical programming model to develop models on analyzing low-cost carriers’ decisions, such as fares, flight frequency and airport selection, in response to demand-supply interaction. First, this study formulates a disaggregate choice model to analyze the impacts of passenger socioeconomic characteristics, origin and destination of the trip as well as supply attributes, such as fare, flight frequency, access time to the airport, travel time and simplified frills on the optimal carrier choice. The total low-cost carrier demand is further estimated by aggregating individual passenger’s choice based on the probability distribution, socioeconomic characteristics and trip distribution in the regional market. Second, this study employs the analytical method to formulate carrier’s operating cost function by considering the impacts of economies of scale, passenger demand and landing fee charged by the airport. This study further formulates a mathematical programming model to determine the fare, flight frequencies and airport selection with demand-supply interactions by maximizing carrier’s total profit.
A case study is presented to illustrate the application of the proposed model using data available from low-cost carrier operating routes with different market background in Taiwan and Southeast Asia. The results show that Taipei-Singapore route earns 14.14% market share, Taipei-Manila route earns 17.32% market share. Demand-supply interaction model also shows that it’s considerable to add weekly flight frequencies of low-cost carrier in Taipei-Singapore route, and low-cost carrier’s total profit will increase by using the developed model. Secondary airport location analysis for the aviation market share changes indicated that low-cost carrier in a well condition secondary airport location with developed access transport system has higher volume. Finally, a case study about the selected low-cost carrier will be provided to illustrate the results and the application of the developed models. Consequently, the expected results of the developed models not only provide basis on studies regarding passenger demand analysis, but also carrier’s decision-making on marketing, operation strategy in a competitive environment. |
