Airline Fuel Efficiency Ranking

Transcription

1 Airline Fuel Efficiency Ranking Bo Zou University of Illinois at Chicago Matthew Elke, Mark Hansen University of California at Berkeley 06/10/

2 Outline Introduction Airline selection Mainline efficiency ranking Mainline-regional affiliation Summary 2 2

3 Introduction Airlines nowadays are more intent to improve fuel efficiency Rising fuel prices Concerns about climate change More environmentally conscious travelers Capability to evaluate airline fuel efficiency becomes important 3 3

4 Introduction Quantify fuel efficiency of large jet operators in the US airline industry in 2010 Mainline airline efficiency assessment based on multiple approaches Consider regional-mainline affiliation Consider routing structure heterogeneity and passenger O-D trip oriented efficiency Provide a generic and transparent airline fuel efficiency scheme 4

5 Mainline airline selection 250 Aircraft Gauge Demarcation 200 Avg seats/aircraft

6 Mainline airline selection Importance of the 15 carriers in system wide fuel consumption Cumulative Fuel Consumptions 1.2E+10 1E+10 8E+09 6E+09 4E+09 2E+09 0 These 15 carriers made up over 80% of all fuel consumed in 2010 Regional airlines made up the other approximately 20% of fuel consumed (excluding Cargo) 6 6

7 Regional Airline selection Set a threshold of 500,000 enplaned passengers (22) Regionals significant domestic contribution: 20% of fuel consumed 30% of Revenue Aircraft Miles 25% of enplaned passengers 7 7

8 Contribution by Study group 1.20E+10 Gallons of Fuel 1.00E E E E E E airlines studied (15 mainlines + 22 Regionals) ~99% of fuel used >99% of Revenue Aircraft Miles >99% of enplaned passengers 8 8

9 Mainline airline rankings Ratio approach Frontier based approaches 9 9

10 Ratio approach Primary Metric used: Fuel / RPM How many gallons of fuel needed on average to move one passenger, one mile Fuel/RPM Fuel/ASM X ASM/RPM Fuel/PM PM/ASM 10 10

11 Mainline Ranking (Fuel/RPM) Fuel (gal) / RPM

12 Fuel inefficiency scores 1.2 Inefficiency Score

13 Efficiency frontier approach Consider two outputs RPM: measuring mobility Departures (DEP): measuring accessibility and capturing effects of takeoffs/landings on fuel use Fuel consumption efficiency: measured against some best achieved level (fuel frontier): Fuel frontier: how much minimum fuel needed in order to produce a certain amount of output 13 13

14 Concept of frontier Fuel consumption B D Frontier A C u B : inefficiency of observation B Output 14 14

15 Specification I: Deterministic frontier 15 15

16 Specification I: Deterministic frontier Deterministic frontier 16 16

17 Specification I: Deterministic frontier Deterministic frontier Inefficiency 17 17

18 Deterministic frontier: Computing inefficiency Deterministic frontier Inefficiency 1. Estimate the frontier parameters using Ordinary Least Square method 2. Calculate residuals 3. Calculate 4. Average by airline to obtain airline inefficiency scores 18 18

19 Limitations of deterministic frontier Deterministic frontier Inefficiency 1. Random noise (e.g. luck and bad weather) 2. Measurement errors Frontier itself can be stochastic 19 19

20 Specification II: Stochastic frontier 20 20

21 Specification II: Stochastic frontier 21 21

22 Specification II: Stochastic frontier Random noise 22 22

23 Specification II: Stochastic frontier Random noise Inefficiency 23 23

24 Specification II: Stochastic frontier Random noise Inefficiency 24 24

25 Specification II: Stochastic frontier Stochastic frontier Random noise Inefficiency 25 25

26 Specification II: Stochastic frontier Stochastic frontier Inefficiency 1. We assume inefficiency follows a truncated normal distribution ( always non-negative) 26 26

27 Specification II: Stochastic frontier Stochastic frontier Inefficiency 1. We assume inefficiency follows a truncated normal distribution ( always non-negative) 2. depends on environmental factors not identically distributed 27 27

28 Specification II: Stochastic frontier Stochastic frontier Inefficiency 1. We assume inefficiency follows a truncated normal distribution ( always non-negative) 2. depends on environmental factors not identically distributed 28 28

29 Stochastic frontier: Computing inefficiency Stochastic frontier Inefficiency Estimate the frontier parameters ( ) using the Maximum Likelihood method Calculate Average by airline to obtain airline inefficiency scores 29 29

30 Frontier estimation results Deterministic Frontier Stochastic Frontier Est P-value Est P-value Ln(RPM) Ln(DEP) Constant Ln(stage length) Ln(ac size) R Likelihood RTS

31 Frontier estimation results Deterministic Frontier Stochastic Frontier Est P-value Est P-value Ln(RPM) Ln(DEP) Constant More departures consume more fuel Ln(stage length) Ln(ac size) R Likelihood RTS

32 Frontier estimation results Deterministic Frontier Stochastic Frontier Est P-value Est P-value Ln(RPM) Ln(DEP) Constant Ln(stage length) Ln(ac size) Longer stage length => R lower fuel efficiency Likelihood RTS

33 Frontier estimation results Deterministic Frontier Stochastic Frontier Est P-value Est P-value Ln(RPM) Ln(DEP) Constant Ln(stage length) Ln(ac size) R Likelihood RTS Constant RTS: 1% increase in RPM 33 and DEP => ~1% fuel increase 33

34 1.2 Inefficiency scores under different approaches (ordered by Fuel/RPM) Inefficiency Score Fuel/RPM Stochastic frontier Deterministic frontier 34 34

35 Inefficiency score correlation Fuel/RPM Fuel/RPM 1 Deterministic Frontier Stochastic Frontier Deterministic Frontier Stochastic Frontier

36 Inefficiency scores (ordered by Fuel/RPM) 1.2 Inefficiency Score Fuel/RPM Stochastic frontier Deterministic frontier 36 36

37 Inefficiency scores (ordered by Fuel/RPM) 1.2 Inefficiency Score Frontier approaches penalize airlines with fewer departures everything else being equal Fuel/RPM Stochastic frontier Deterministic frontier 37 37

38 Mainline-Regional Affiliation Assigning regional RPM s to mainlines Constructing adjusted fuel efficiency measures 38 38

39 Mainline-Regional Affiliation Domestic air traffic based on: Hub-and-spoke system Mainlines contract out service on lower demand and marginal segments to affiliated regionals Regional airline traffic share steadily increasing 39 39

40 Types of Affiliations Mainline-regional relationships take two forms Regional is a wholly owned subsidiary of the mainline carrier (i.e. American Eagle) Regional is an Independent company contracting its services out to the mainline airline(s) (i.e. SkyWest) Mainline controls ticketing and scheduling for the regional, and aircraft are under mainline brand Type of relationship determines how RPMs can be accurately apportioned 40 40

41 Apportioning Regional RPMs Apportion a regional s entire RPMs to one mainline carrier If the regional is a wholly owned subsidiary of that mainline If the regional is independent but has an exclusive agreement with a mainline carrier Apportion regional RPMs for each segment it served If a regional is independent and flies for multiple mainline carriers out of an airport If a regional flies for more than one mainline on a segment, use the ratio of mainline traffic to split RPMs 41 41

42 Mainline + Regional RPMs 1.20E E E+10 RPM (main) RPM (main+reg) RPMs 6.00E E E E

43 Mainline + Regional RPMs Regional Carrier Apportioned RPM % RPM app. PSA (new) 1,677,034, % Piedmont Airlines 518,216, % Pinnacle Airlines 4,210,577, % Colgan Air 573,433,520 97% Trans States Airlines 741,021,563 98% CommutAir (champlain ent) 145,073, % Compass Airlines 2,210,100, % Atlantic Southeast Airl. 5,384,997,748 98% Freedom Airlines 315,123, % GoJet Airlines 1,530,592, % American Eagle 7,386,172, % Comair 2,919,863, % Skywest 10,971,400,000 93% Executive Airlines (New) 264,017, % Horizon Air 2,224,661, % Chautauqua Airlines 1,690,870,678 79% Shuttle America 2,609,768,611 96% ExpressJet/Cont. Exp. 7,808,116,996 95% Mesaba Airlines Inc. 3,381,681,196 99% Mesa Airlines 3,538,361,387 91% Republic Airlines/Hughes 5,569,788,120 94% Air Wisconsin 1,820,269, % 43 43

44 Mainline-Regional composite fuel Ratio approach inefficiency Frontier approach 44 44

45 Considering regional affiliations reduce the fuel efficiency of the mainline airlines under the ratio approach Regional carriers provide services with high accessibility, and therefore can boost efficiency, leading to smaller overall efficiency change 45 45

46 Passenger O-D trip oriented fuel efficiency Regional carriers operations support hugand-spoke services provided by mainlines Hub-and-spoke carriers should be penalized if considering efficiency of moving passengers from their origins to destinations 46 46

47 Passenger O-D trip oriented fuel Ratio approach efficiency where Frontier approach 47 47

48 Ratio approach penalizes hub-andspoke carriers Frontiers are reshaped, but difference in inefficiency scores w/ and w/o considering circuity is small 48 48

49 Summary This research examines fuel efficiency of large jet operators in the US Multiple approaches are employed, providing different perspectives on efficiency measurement Regional carriers are important to the overall fuel efficiency of mainline-regional composites Considering circuity changes the traditional airline efficiency picture. However, the effect seems not significant using frontier methods Future research may consider fuel efficiency vs. overall technical efficiency 49 49

50 Thank you! Questions? 50 50

51 Calculated circuity 51 51