Airline capacity decisions under supply-demand equilibrium of Australia's domestic aviation market

Mohammadian, I, Abareshi, A, Abbasi, B and Goh, M 2019, 'Airline capacity decisions under supply-demand equilibrium of Australia's domestic aviation market', Transportation Research Part A: Policy and Practice, vol. 119, no. January, pp. 108-121.


Document type: Journal Article
Collection: Journal Articles

Title Airline capacity decisions under supply-demand equilibrium of Australia's domestic aviation market
Author(s) Mohammadian, I
Abareshi, A
Abbasi, B
Goh, M
Year 2019
Journal name Transportation Research Part A: Policy and Practice
Volume number 119
Issue number January
Start page 108
End page 121
Total pages 14
Publisher Pergamon Press
Abstract Australia is especially reliant on air transportation because of the geographical distribution of the urban centers across the country. This paper seeks to identify the antecedents of the capacity decisions of the airlines operating in Australian domestic aviation market. We examine the factors on both sides of the supply-demand equilibrium using monthly data of twenty-one major domestic routes linking eight major cities between January 2004 and December 2015. To investigate the relationship between flight demand and the variables of capacity decisions (flight frequency, aircraft size, load factor, and available seats), the pooled series cross-sectional data are analyzed using a two-stage least-squares method to model the supply-demand interaction. The results statistically differentiate the airlines strategies regarding capacity decisions for the short-haul, medium-haul, and long-haul routes. The results suggest that competition would lead to more flights, smaller aircraft size, lower load factors, and more available seats in all markets. Low-cost carriers play a key role in the short-haul market. Higher jet fuel prices scales up aircraft size on all flight routes. Notably, the socio-economic parameters of population and employment rates affect flight demand more strongly on the long-haul routes than other routes.
Subject Logistics and Supply Chain Management
Keyword(s) Australia
Aviation
Capacity decisions
Econometrics
Supply-demand equilibrium
DOI - identifier 10.1016/j.tra.2018.10.039
Copyright notice © 2018 Elsevier Ltd. All rights reserved.
ISSN 0965-8564
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