Scheduled Service Versus Personal Transportation: The Role of Distance

Abstract

This paper presents a theoretical and empirical analysis of the relationship between frequency of scheduled transportation services and their substitutability with personal transportation (using distance as a proxy). We study the interaction between a monopoly …rm providing a high-speed scheduled service and private transportation (i.e., car). Interestingly, the carrier chooses to increase the frequency of service on longer routes when competing with personal transportation because by providing higher frequency (at extra cost) it can also charge higher fares which can boost its pro…ts.However, in line with the results of earlier studies, frequency decreases for longer ‡ights when driving is not a viable option. An empirical application of our analysis to the European airline industry con…rms the predictions of our theoretical model.

Does European high-speed rail affect the current level of air services? An EU-wide analysis

“…For a given number of seats supplied, the airlines can use smaller or larger planes, thus offering higher or lower frequencies, respectively (Givoni and Rietveld, 2009;Bilotkach et al, 2010). Frequency-oriented supply can be part of a strategy to keep time-sensitive passengers, usually business passengers, prepared to pay high fares in order to save time.…”

“…Following, Jorge-Calderón (1997) and Bilotkach et al (2010), for example, our initial set of independent variables is a mix of geo-economic and transport-related factors introduced in Table 2. This set is also guided by the findings summarised in Table 1, which notably highlight the role of travel time, frequency, airline hubs and access to the station.…”

Competition and public service obligations in European aviation markets

“…Data for the departures of each airline on each leg (used for computing the HHI index), the flight frequencies and the number of routes served at the airports of origin and destination are all obtained from the Official Airline Guide (OAG) 14 In an analysis of European routes, Bilotkach et al (2010) show that competition between planes and cars is determined by distance, as distant cities are generally linked by high-capacity roads of similar quality. See also Lian and Ronnevik (2011) for a similar analysis.…”

“…Another group of papers use multivariate econometric analyses to identify the determinants of route competition and flight frequencies in domestic markets. These papers include Bilotkach et al (2010), Borenstein and Netz (1999), Brueckner and Pai (2009), Calzada and Fageda (2012), Pai (2010), Salvanes et al (2005), Schipper et al (2002) and Wei and Hansen (2007). In general, they point to the relevance of characteristics such as route distance and aircraft size on the flight frequencies offered.…”

A Framework for Modeling "Real-Life" Airline Networks

“…Flores-Fillol (2009) uses a similar framework to Brueckner and Flores-Fillol's to analyze the issue of competing airlines' choice of network structure (while still not allowing the carriers to choose mixed networks of the kind discussed here). Bilotkach et al (2008) supplement Brueckner and Flores-Fillol's model with consumer heterogeneity of the kind introduced in this study to examine the choice of a monopoly provider of scheduled transportation services (for example, airline company or high-speed rail operator) facing consumers who have an option of an alternative entailing lower speed but higher level of mobility (that is, personal vehicle).…”