The analysis of Impact of Larger Aircraft on Frequency of Flight Isabelle Laplace, Chantal Roucolle, Aliya Ussinova Workshop ATM in smart and efficient air transport systems Oslo, May 31 st 2017
Context Launching on the market aircraft with innovative technologies is a challenge for aircraft manufacturers, especially if it is operated differently Some airlines decide to operate first this aircraft because of an expected competitive advantage on the market But what about other airlines? What are the impacts on their strategies? Do they have incentives to follow the innovation?
Strategic theoretical approach to innovation and competition Aghion and al. (2002): firms that operate on a competitive market have incentives to innovate in order to soften competition and become leader of the market Laggard firms have less incentives to innovate Counterexample on the air transport market: Low-cost business model launched by laggard airlines
Strategic theoretical approach to innovation and competition Air transport experience is in line with the disruptive innovation theory (Gemici and al. 2015): Disruptive innovation involves products or services that change existing market or create new ones, by trading off raw performance for the sake of other features (e.g. simplicity, convenience, affordability, etc.)
A380: innovation in the air transport system A relevant illustration of disruptive innovation in air transport is the introduction of the aircraft A380 Disruptive innovation linked to its significant larger size Source Boeing
Aircraft size & flight frequency Both have big impacts on the entire aviation industry: For airlines to provide the most adapted air transport capacity For airport planners fom both technical (runways, gates etc.) and practical (congestion) points of view For policy makers to plan infrastructure investments and for future traffic control regulations Wei and Hansen (2005) argue that airlines have economic incentives to use smaller than optimal size aircraft Factors impacting the aircraft choice also impact flight frequencies
Questions Does the use of the A380 by an airline on a particular route give incentives to competitors to introduce as well this type of aircraft on the same route? Does the introduction of the A380 on the market change airlines behaviour in terms of flight frequency?
Database presentation OAG data for 2006-2015: monthly supply per airline (seats+freight) on 118 airport pairs routes where A380 is in use ENAC air transport database: annual passenger traffic flows per airport pair WorldBank: city population data
Main variables of the model Main interest variables Variable code FREQ NUMBCOMP RATIO380 COMPRATIO380 LOGPOP LOGTRAF Variable description Frequency of flights supplied by airline j on route i per month Number of airlines operating on route i at period t Ratio of maximum total weight (cargo and seats converted to kg) transported by aircraft Competitors' ratio of total weight (cargo and seats converted to kg) transported by A380 on the route Logarithm of population at departure airport of route i per year Logarithm of two-way annual traffic on the route Role Variable to be explained Used to represent the intensity of competition on the market Reflects the own intensity of utilization of A380 on the route Reflects the intensity of utilization of A380 by competitors on the route Used to measure the traffic demand evolution
Main preliminary results: main interesting effect Exogenous variables Model A.1 RATIO380-4.960*** (0.70) COMPRATIO380 1.207* (0,476) NUMBCOMP 0,269** (0,12) Model A.2-4.958*** (0.70) 1,214* (0,476) 0,268** (0,12) Note: Std.Err. in parenthesis; *** 1% significance; ** 5% significance; * 10% significance Positive sign: Airline increases its flight frequency when the number of competitors increases (general result)
Questions Does the use of the A380 by an airline on a particular route give incentives to competitors to introduce as well this type of aircraft on the same route? Does the introduction of the A380 on the market change airlines behaviour in terms of flight frequency?
Questions Does the use of the A380 by an airline on a particular route give incentives to competitors to introduce as well this type of aircraft on the same route? Does the introduction of the A380 on the market change airlines behaviour in terms of flight frequency?
Next steps Incentives to follow the A380 innovation modelled and shown on one route (Frankfurt New-York JFK) Next steps: Extend the model on the 118 routes of our sample Include fuel cost (estimated from BADA for each route and each aircraft)