David Gillen

Bundling, integration and the delivered price of air travel: are low cost carriers full service competitors?

We explore the interaction between full service carriers (FSCs) and low cost carriers (LCCs) in a market for air travel, of which flying is merely one component in a bundle of services. The paper employs a locational approach to product differentiation to provide insights concerning the degree to which LCCs compete with FSCs. This approach highlights the role of airports in both geographic location relative to the travel market and as independent business entities that generate both airside and groundside revenues. A simple address model is used to illustrate conditions under which LCCs (affiliated with subsidiary airports) only constitute partial competition for FSCs. Consequently, market interactions between FSCs and LCCs can exhibit price stability and relatively low price dispersion. The model also indicates that vertical relationships between airports and airlines can be both profit enhancing and socially desirable.

Estimation and specification of the effects of parking costs on urban transport mode choice

Abstract The effect of changes in parking fees on urban transport mode choice is investigated to evaluate the claim that parking taxes are an effective substitute for road pricing in influencing congestion. It is shown that previous analyses of the modal choice decision with respect to parking costs have misspecified the model, resulting in biased predictions. Binary logit analysis is used to estimate the traditional and correctly specified models. Elasticities for four policy oriented variables are calculated. The elasticities provide a measure of the bias from misspecification and indicate the most effective policy variables to reduce auto use.

The Full Cost of Intercity Highway Transportation

In this paper we review the theoretical and empirical literature on the cost structure of the provision of intercity highway transportation and specify and estimate our own cost functions . We develop a full cost model which identifies the key cost components and then estimate costs component by component: user costs, infrastructure costs, time and congestion costs, noise costs, accident costs, and pollution costs. The total long run average cost is

Regulation, competition and network evolution in aviation

0.34 per vehicle kilometer traveled. The single largest cost category is freeflow travel time. While the marginal cost of infrastructure is higher than its average cost, indicating that new construction is increasingly expensive, the marginal cost of driving (user fixed and variable costs) is less than the average cost, indicating that by increasing travel the user can spread his fixed cost of a vehicle over more trips without penalty.

PARKING POLICY, PARKING LOCATION DECISIONS AND THE DISTRIBUTION OF CONGESTION*

Abstract Our focus is the evolution of business strategies and network structure decisions in the commercial passenger aviation industry. The paper reviews the growth of hub-and-spoke networks as the dominant business model following deregulation in the latter part of the 20th century, followed by the emergence of value-based airlines as a global phenomenon at the end of the century. The paper highlights the link between airline business strategies and network structures, and examines the resulting competition between divergent network structure business models. In this context we discuss issues of market structure stability and the role played by competition policy.

Parking location and transit demand: A case study of endogenous attributes in disaggregate mode choice models☆

The paper develops and tests a model which characterizes the parking location decisions of individual tripmakers. The model is designed to offer information concerning the effects of alternative parking policies on parking location decisions and therefore the effects on the distribution of congestion in an urban area.Own price, time price and full price elasticities for alternative parking locations are estimated. The own price elasticity is found to rise with distance from the destination point while the time price elasticity falls with distance. The full price elasticity is found to be relatively stable.One is able to determine from the calculated elasticities, the effects of alternative parking policies such as raising parking fees, time restrictions, or increasing search or transaction costs on the distribution of individuals consuming parking services; from this one can infer the impact on the distribution of congestion.The paper also offers some explanation for the low elasticity of auto use with respect to changes in parking costs found in some modal choice studies.

Aviation infrastructure performance and airline cost: a statistical cost estimation approach

Abstract This paper discusses a simultaneous model of transport mode choice and optimal parking location for the auto mode. In developing this model, four extensions of disaggregate choice theory are made that should be useful in other applications. These extensions are: (1) the formulation of an econometric model that allows for continous endogenous attributes in discrete choice decisions; (2) the use of an econometric estimation technique that is implementable using existing computer programs; (3) the development of an explicit reduced form expansion path cost model of location decisions; and (4) the extension of aggregation procedures to predict both transit demand and the spatial distribution of parking.

Measuring the joint impact of governance form and economic regulation on airport efficiency

The relationship between the performance of the U.S. National Airspace System (NAS) and airline costs is examined by estimating airline cost functions which include NAS performance metrics as arguments, using quarterly data for 10 U.S. airlines. Performance metrics that vary by airline and quarter are developed by applying factor analysis to seven underlying variables, including average delay, delay variance, and the proportion of flights which are cancelled.

The social costs of intercity transportation: a review and comparison of air and highway

This paper examines the joint impact that governance structure and economic regulation has on airport efficiency. The previous literature has focused on one or the other of these factors but not both. The empirical investigation uses a semi-parametric Bayesian distance stochastic frontier model, as well as a Data Envelopment Analysis (DEA) model. Based on a panel of airports in several countries we find that the form of economic regulation is relatively more important than the type of governance in affecting efficiency. The article provides measures of changes in expected efficiency when either or both the governance form and price regulation changes.

The structure of intercity travel demands in Canada: Theory tests and empirical results

This paper provides a comprehensive survey of the literature on the measures of social costs, providing an indication of the state of engineering and economic literature. We operationalize the new thinking about which externalities seem appropriate to consider in an analysis of the transportation system. We construct measures of each externality: noise, air pollution, accidents, and congestion for the highway and air transportation modes, where possible as a function of the amount of output or use, rather than as simple unit costs. We find that noise is the dominant cost of air travel, followed by congestion, air pollution and accidents. For highway travel, accidents are the most significant cost, followed by congestion, noise, and air pollution. The social costs of highway travel are about 15 percent of the full cost of a highway trip, while the smaller social costs of air travel are only 5 percent of the full cost of an air trip. A highway trip generates four to five times as much externality as an air trip.