Impact of aircraft size and seat availability on airlines’ demand and market share in duopoly markets

Demand often exceeds capacity at the congested airports. Airline frequency competition is partially responsible for the growing demand for airport resources. We propose a game-theoretic model for airline frequency competition under slot constraints. The model is solved to obtain a Nash equilibrium using a successive optimizations approach, wherein individual optimizations are performed using a dynamic programming-based technique. The model predictions are validated against actual frequency data, with the results indicating a close fit to reality. We use the model to evaluate different strategic slot allocation schemes from the perspectives of the airlines and the passengers. The most significant result of this research shows that a small reduction in the total number of allocated slots translates into a substantial reduction in flight and passenger delays, and also a considerable improvement in airlines' profits.

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“…The conclusions are mostly mixed. Wei and Hansen (2005) have provided statistical support for the S-curve, based on a nested…”

Section: Airline Frequency Competitionmentioning

confidence: 99%

Modeling Airline Frequency Competition for Airport Congestion Mitigation

Vaze

Barnhart

2012

Transportation Science

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“…While reporting some evidence of the S-curve relationship in the early 1990's, they observe a much flatter linear relationship between market share and frequency share in the early 2000's. In another recent study, Wei and Hansen [24] provide statistical support for the S-curve effect of airline frequency on market shares, based on a nested logit model for non-stop duopoly markets. In this paper, we use a more general model that is compatible with the linear, as well as the S-curve assumptions.…”

Section: Frequency Planning Under Competitionmentioning

confidence: 99%

The Price of Airline Frequency Competition

Vaze

Barnhart

2015

Springer Series in Reliability Engineering

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Frequency competition influences capacity allocation decisions in airline markets and has important implications to airline profitability and airport congestion. Market share of a competing airline is a function of its frequency share and the relationship between the two is pivotal for understanding the impacts of frequency competition on airline business. Based on the most commonly accepted form of this relationship, we propose a game-theoretic model of airline frequency competition. We characterize the conditions for existence and uniqueness of a Nash equilibrium for the 2-player case. We analyze two different myopic learning dynamics for the non-equilibrium situations and prove their convergence to Nash equilibrium under mild conditions. For the N-player game between identical players, we characterize all the pure strategy equilibria and identify the worstcase equilibrium, i.e. the equilibrium with maximum total cost. We provide an expression for the measure of inefficiency, similar to the price of anarchy, which is the ratio of the total cost of the worst-case equilibrium to the total cost of the cost minimizing solution and investigate its dependence on different parameters of the game.

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“…At their hubs, airlines intensifi ed their use of the hub-and-spoke model 1 to exploit economies of scale (Bailey et al, 1985). In seeking to increase profi t, airlines found that increasing fl ight frequency was a more effective tool to garner market share than reducing fares (Borenstein & Netz, 1999;Wei & Hansen, 2005). In short, airlines found increasing the number of fl ights serving their key hub airports both minimized cost and maximized profi t.…”

Section: Airport Congestion On the Risementioning

confidence: 99%