Anming Zhang

Airline Network Rivalry

In this paper, the effects of the strategic interaction between deregulated airlines on their network choice are analyzed. The authors examine whether switching from a linear to a hub-spoke network confers a strategic advantage because it saves costs and improves service quality. They find that, if hubbing lowers total cost (which includes both airline and passenger inconvenience costs), the pursuit of strategic advantages usually intensifies the extent of hubbing. Even if hubbing raises total cost, it might be pursued by the airline either because hubbing is a dominant strategy in an oligopolistic setting or because hubbing will be useful in deterring entry.

A study of the R&D efficiency and productivity of Chinese firms

Abstract This paper investigates the influence of ownership on the research and development (R&D) efficiency of Chinese firms. In a sample of 8341 Chinese industrial firms, ownership is found to be a contributing factor in the cross-sectional variance of both R&D and productive efficiencies. The state sector has significantly lower R&D and productive efficiency than the non-state sector. Within the non-state sector, foreign firms have higher R&D and productive efficiency than domestic collective-owned enterprises and joint stock companies. The higher R&D efficiency of foreign firms appears to be due to a higher R&D intensity, which in turn leads to higher productivity.

Airport charges and capacity expansion: effects of concessions and privatization

Abstract This paper examines the decisions on airport charges and capacity expansion made by airports with different objectives. We find that allowing an airport to have profitable concession operations may be more welfare improving than the alternative of depriving the airport of all profits from concession operations. Furthermore, the airport charge of a social welfare-maximizing airport would be lower than that of a budget-constrained public airport, which, in turn, would be lower than that of a privatized airport pursuing profit maximization. We also show that a constrained public airport would add capacity later than a social welfare-maximizing airport, whilst a privatized airport would add capacity later still. Given that constrained public airports represent the second-best situation, the capacity decisions of privatized airports would be socially suboptimal.

DYNAMIC OLIGOPOLY BEHAVIOUR IN THE AIRLINE INDUSTRY.

Abstract This paper examines the dynamic interaction between United Airlines and American Airlines on a set of duopoly routes. We estimate quarterly ‘conduct parameters’ (or ‘conjectural variations’) and test constant behaviour Bertrand, Cournot, and collusive models. We also test two regimeswitching models derived from the Green-Porter price war model, one based on reversion to Bertrand behaviour during price wars, the other on reversion to Cournot behaviour. The three constant behaviour models are all rejected. The regime-switching models can both describe the data but the Cournot-based version is preferred.

An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets

This paper empirically investigatesthe effects on air fares, passenger volume, andconsumer surplus of four major alliances in NorthAtlantic aviation markets. The four alliances areBritish Airways/USAir, Delta/Sabena/Swissair,KLM/Northwest, and Lufthansa/United Airlines. We findthat equilibrium passenger volume increased by some36,000 passengers annually and equilibrium air faresdecreased by an average of

Concession revenue and optimal airport pricing

41 on the routes servedby the allying carriers, and that consumers weregenerally better off due to the alliances.

Analysis of an international air-cargo hub: the case of Hong Kong

In recent years airports have been under growing pressure to become financially self-sufficient and to pursue profit maximization in their non-aeronautical or concession operations. In this paper we examine the optimal pricing in a model where concession and aeronautical operations of an airport are considered together with an overall break-even constraint. We find that the optimum solution may require a subsidy from concession to aeronautical operations. However, such a cross-subsidy may or may not restore marginal-cost pricing on aeronautical operations. On the other hand, social welfare can be higher when an airport is allowed to make profits in concession operations than when marginal-cost pricing is imposed on concession operations.

Issues on liberalization of air cargo services in international aviation

This paper discusses Hong Kong air cargo in the context of both China and the Asia-Pacific region. We provide a description of a conceptual framework that is useful for discussing the role of an international airfreight hub, a detailed discussion on the characteristics and trends of air cargo in Hong Kong, an examination of Hong Kongs major competitors in an increasingly competitive regional and global market, including airports in China and East Asia, and an analysis of the competitive factors in the industry. The interaction between Hong Kong and Mainland China in their international aviation policies has also been discussed.

A note on optimal airport pricing in a hub-and-spoke system

This paper provides a general discussion of various issues related to the liberalization of air cargo services in international aviation. It shows that all-cargo carriers may have different routing needs than passenger carriers and thus require different sets of air traffic rights from those needed by passenger carriers. On the other hand, separation of air cargo and passenger rights will be fraught with difficulty in Asia because of distinctive characteristics of its air cargo market, where most passenger carriers have substantial cargo business and operate “combi†fleets. Customs and inter-modal transportation are also discussed in the context of cargo liberalization.

Profitability and productivity of Chinese industrial firms Measurement and ownership implications

This paper deals with the socially optimal pricing of airports in a hub-and-spoke network, taking into account explicitly the fact that demands for airport services at hub airport and spoke airports are complementary. It is shown that a welfare gain is to be made by switching from the regime of pricing each airport independently of other airports in the network to the regime of pricing the hub and spoke airports jointly. Intuitively, given the demand complementarity, the optimal pricing of a hub-and-spoke airport network as a system may require for the hub airport to subsidize the money-losing spoke airports. Our result implies that there may be a welfare loss due to the reduction in allocation efficiency if a network of airports currently being managed by a national government are to be defederalized (or privatized) separately for each airport as being carried out in Canada and in Australia. Since one of the major reasons for defederalization (or privatization) of airports is to reduce x-inefficiency caused by the centralized, bureaucratic and inflexible management, the welfare loss due to the allocative inefficiency should be weighed against the one-time gain in x-efficiency expected from defederalization of those airports. This result calls for a caution on the current debate on airport devolution which focuses mainly on the expected one-time reduction in x-inefficiency in airport operation and management and the need for flexible attitude toward local community needs, without even discussing its effects on reduced allocative efficiency which will continue to occur in perpetuity.