Can the European low-cost airline boom continue? Implications for regional airports

At a time when the traditional major airlines have struggled to remain viable, the low-cost carriers have become the major success story of the European airline industry. This paper looks behind the headlines to show that although low-cost airlines have achieved much, they too have potential weaknesses and face a number of challenges in the years ahead. The secondary and regional airports that have benefited from low-cost carrier expansion are shown to be vulnerable to future changes in airline economics, government policy and patterns of air service. An analysis of routes from London demonstrates that the low-cost airlines have been more successful in some markets than others. To attractive and historically under-served leisure destinations in Southern Europe they have stimulated dramatic growth and achieved a dominant position. To major hub cities however they typically remain marginal players and to secondary points in Northern Europe their traffic has been largely diverted from existing operators. There is also evidence that the UK market is becoming saturated and new low-cost services are poaching traffic from other low-cost routes. Passenger compensation legislation and possible environmental taxes will hit the low-cost airline industry disproportionately hard. The high elasticities of demand to price in certain markets that these airlines have exploited will operate in reverse. One of the major elements of the low-cost business model involves the use of smaller uncongested airports. These offer faster turn-arounds and lower airport charges. In many cases, local and regional government has been willing to subsidise expansion of air services to assist with economic development or tourism objectives. However, recent court cases against Ryanair now threaten these financial arrangements. The paper also examines the catchment areas for airports with low-cost service. It is shown that as well as stimulating local demand, much traffic is captured from larger markets nearby through the differential in fare levels. This has implications for surface transport, as access to these regional airports often involves long journeys by private car. Consideration is then given to the feasibility of low-cost airlines expanding into the long-haul market or to regional operations with small aircraft. Many of the cost advantages are more muted on intercontinental services.

Dynamic cost indexing: cost estimations and building the prototype

The design of a decision-support prototype tool for managing flight delay costs in the pre-departure and airborne phases of a flight is described. The tool trades accelerated fuel burn and emissions charges against 'cost of time'. Costs for all major 'cost of time' components, by three cost scenarios, twelve aircraft types and by magnitude of delay are derived. Short-term opportunities for saving fuel and/or reducing environmental impacts are identified. A shift in ATM from managing delay minutes to delay cost is also supported.

Understanding what drives the purchase decision in pension and investment products

The aims of this paper are to first seek an understanding of consumer decision-making when purchasing pension and investment products, and second to ascertain how this decision-making affects the consumer's choice of distribution route. The study employed both focus groups and postal questionnaire survey methods based on the framework of a classical decision-making model that investigated problem recognition, information search, evaluation tools used and post-purchase. The findings show that the decision-making process experience differed to a lesser or greater degree depending on the distribution route. The majority of respondents had recognised the need to make a purchase decision long before seeking information. Younger respondents on all incomes believed that they must make some pension provision for themselves as opposed to relying on the government's retirement provision. Many changed channels for information searches, but tended to settle with the Independent Financial Adviser (IFA). The two main evaluation tools for pension and investment were found to be the ‘charges’ and ‘historic fund performance’. The vast majority of respondents reiterated their worry that the outcomes would not be known until retirement. In terms of analysis by the level of ‘financial literacy’, respondents who scored in the upper quartile were more inclined to be on a higher income, less inclined to evaluate on charges and more proactive in discussing the investment strategy of their pension fund. Respondents who scored in the lower quartile had opposite results. One of the implications of these findings is that the younger respondents’ recognition of pension savings favours the government's intention to reverse the existing balance of pension distribution. The other main implication is that the findings will be of help to managers in appreciating the dominance of the IFA channel by providing an explanation of why consumers choose this route, and, additionally, can assist direct marketing managers in identifying customers who will be more likely to use multichannel or single-channel shoppers. It can also help the marketing manager increase the usage of different channels by addressing the factors driving the purchase decision and distribution choice.

The challenge of managing airline delay costs

Estimates of airline delay costs as a function of delay magnitude are combined with fuel and (future) emissions charges to make cost-benefit trade-offs in the pre-departure and airborne phases. Hypothetical scenarios for the distribution of flow management slots are explored in terms of their cost and target-setting implications. The general superiority of passenger-centric metrics is of significance for delay measurement, although flight delays are still the only commonly-reported type of metric in both the US and Europe. There is a particular need for further research into reactionary (network) effects, especially with regard to passenger metrics and flow management delay.