Airlines on the North Atlantic run at a loss, and increased fares would not make them profitable unless capacity were sharply reduced. That might require innovations in the type of service provided, which must be settled between governments.
Topic: 4. Aviation
This paper explores the possibility that the fortress hub is a consequence of the nature of airline hub-spoke rivalry. Entry into a competitor’s local market may reduce the entrant’s profit in his own market. As a result, there is a deterrent to entry if the negative effects are strong enough. The paper also examines the impacts of local competition on consumer surplus and total social surplus.
As a practical criterion it is suggested that a balance between private and public passenger transport might be planned with the object of minimising the total of all journey times. The data needed to implement such a criterion are described and a hypothetical example is give using data relating to Leicester. The method of diverting passengers from private to public transport is not revealed.
It is debatable whether full market liberalisation will generate maximum social benefits. This paper looks at the topic from the European perspective and examines the possible need for collective action by airlines to allow positive, long-term social returns.
In 1987 the US Civil Aeronautics Board mandated an auction in cases of oversales, to reduce involuntary passenger removals. Oversales have increased but involuntary removals have greatly decreased. The auction system has been a Pareto improvement, as predicted on the basis of theoretical and empirical evidence.
Tourist industry officials lobby governments to invest in longer runways and larger terminals in order to accommodate direct flights. The authors evaluate the introduction of direct flights from the west coast of the US to Hawaii’s neighbouring islands, bypassing the previous hub, Honolulu. They find a significant, though modest, increase in travel. Direct flights may not always generate enough additional travel demand to warrant the necessary investments.
Deregulation of US aviation has not been followed by a marked increase in accidents. But there is evidence that safety has been impaired by failure to expand infrastructure and surveillance to keep pace with the increase in numbers of travellers.
When an aircraft crashes, there is an immediate fall in the market price of the stocks of the airline, but no subsequent reaction. The stocks of other airlines and of aircraft manufacturers are not affected.
Aerodynamics and economics are combined to show the effect on aircraft design of changes in relative prices, especially the price of fuel. Higher capital cost reduces operating cost. Only airlines that operate few miles per year will select cheaper aircraft with high running cost.