John Francis O'Connell

In the airline industry, where information asymmetry prevails, airlines employ various strategies to maximise profitability. Signalling theory offers a valuable framework for understanding how airlines communicate the quality of their offerings to consumers through pricing signals. This theory suggests that signallers (airlines) use pricing to indicate the quality of their products or services to receivers (consumers), who then use these signals to inform their purchasing decisions (Connelly et al., 2011). Airlines often differentiate themselves by signalling through market share, pricing, and brand perception, with pricing being a particularly potent indicator of quality (Jeng, 2016; Jiang et al., 2014). Elevated prices for premium products can effectively signal superior quality, providing consumers with confidence in their more expensive purchasing choices (Bagwell, 1992).

Traditional economic theories suggest that a higher market share often acts as a quality signal, indicating to consumers that many others have favoured a company's products or services, thereby implying superior quality (Caminal & Vives, 1996). Bhattacharya et al. (2022) further empirically demonstrates that firms with higher market share can deliver more credible signals, enabling them to set higher prices and consequently enhance profitability.

This study enriches signalling theory by incorporating relative price, which reflects the price differences between products of varying quality. This pricing framework segments consumers and signals quality differences between service tiers. Hernandez (2011) contributes to this expanded understanding by demonstrating that competition influences pricing strategies. Their findings indicate that the optimal price ratio between products of varying quality levels widens with increased competition intensity. This suggests that in competitive markets, a larger price differential is used effectively to signal superior quality, offering a competitive advantage. However, the effectiveness of price signals is contingent on market structure. While price differentiation can reinforce consumer perceptions of quality, Basdeo et al. (2006) argue that when multiple firms engage in similar signalling strategies, the clarity of any single price signal may be diminished. In such cases, firms must establish sufficiently pronounced price differentiation to ensure their signals remain distinct and effective in influencing consumer perceptions.

This study bridges an empirical gap by employing the relative price to analyse how pricing strategies between business and economy classes serve as signals of quality and impact airline profitability. Relative price quantifies the deviation of business and economy class pricing of an airline from the average fare on specific routes, providing a nuanced measure of how airlines use price differentiation as a mechanism to convey service quality. At each airline level, relative price is a strategy characterised by setting higher business class fares to maximise revenue, while offering lower economy class fares to boost sales. As most routes offer two or three distinct quality tiers, such as business and economy class, this market structure is particularly well-suited for such an investigation. Furthermore, competitive routes represent high-demand market where multiple airlines with varying characteristics operate, while non-competitive routes tend to have lower demand. Consequently, the extent to which market share signals quality may vary across markets. It is more likely to reflect quality in competitive routes, while in less competitive markets, where consumer choice is limited, it may instead reflect a lack of alternatives rather than superior service. By analysing the impact of relative price signals on airline revenues across different market contexts using real-world airline data, this study contributes to signalling theory by exploring these dynamics in a practical, real-world setting.

The Association of Southeast Asian Nations (ASEAN) and the European Union (EU) signed the Comprehensive Air

Transport Agreement (CATA) between their member states in October 2022.

The ASEAN-EU CATA is the world’s first bloc-to-bloc air transport agreement and reflects the latest policy

thinking in air transport regulation. The agreement allows the carriers of the two blocs to operate passenger and

cargo services between and beyond both regions, by exercising Fifth Freedom traffic rights and liberalising

codeshare restrictions.

Since 2014 and despite both sides showing a commitment to elevating their aviation relations to a new level,

the two regions remain different regarding the level of domestic air travel market integration and liberalisation.

These intrinsic variations contribute to creating disadvantages in the competitive position of ASEAN-based

carriers when compared to their EU counterparts.

This study aims to investigate the possible implications of the CATA on the competitive dynamics of airlines in

both markets, by applying the Competitive Dynamics Model to analyse the interactions in the strategies and

responses, and its implications on the performance of the relevant air carriers. Using secondary data, a series of

quantitative indicators are utilised to examine selected ASEAN and EU carriers’ awareness, motivation, and

ability to respond to the novel changes in the industry’s regulatory and competitive environment.

While the findings indicate the strategic responses of both ASEAN and EU carriers is more focussed on interline

agreements and joint ventures, competitive rivalry is to remain intense for popular destinations such as those to

and from Thailand and Singapore.

The study analyses the advantages in the scheduled frequencies and fares of the big three Middle Eastern

carriers and Turkish Airlines, over home airlines in major ASEAN and EU hubs. The CATA-induced partially

liberalised market will drive more partnerships among ASEAN and EU carriers to align schedules in their

respective hubs as a response to competition posed by Middle Eastern carriers. The findings suggest that the

possible actions and reactions of airlines to one another are precursors to driving changes in market structure

over time within the new ASEAN-EU CATA framework.

While one salient characteristic of hub airports lies in connecting passengers, the full-service airlines in North America concentrate their networks spatially over a number of hubs. Having witnessed the emerging multi-hub network, this paper investigated the flight scheduling problem under a multi-hub configuration, taking a well-defined bank structure and airport operational restrictions into account. An integrated non-convex Mixed-Integer Nonlinear Programming (MINLP) approach was proposed to enhance airline connectivity, considering different combinations of traffic flow direction and connecting times. To verify the scalability and effectiveness of the proposed model, a comprehensive case study has been undertaken with real-world scheduling data from Air China, which was solved by a novel problem-specific Selective Simulated Annealing (SSA) algorithm. Substantial improvements were achieved without sacrificing the scheduling efficiency. Precisely, the program adjusted the flights during a typical operational day in a timely manner. The post-optimisation outcomes have witnessed its effectiveness with a 17.97%, 17.06%, 22.41% and 53.86% increase in airline connectivity at its four major hub airports (Chengdu Shangliu, Beijing Capital, Shanghai Pudong and Hongqiao) in China, respectively. A clear pattern of the bank structure also confirms its positive impact on airline connectivity under the multi-hub network configuration. Lastly, a comparative analysis for the distribution of all feasible connections further highlights the critical challenge concerning the role of the hubs in a multi-hub network. More specifically, Air China’s multi-hub network systematically performs better on Domestic-International routes, due to flight schedule, frequencies, geographical placements and detours. Among the four hub airports, Beijing Capital International Airport stands out as a dominant one, which implies its potential to serve as a robust international hub airport.
•Proposes a passenger-centred multi-hub scheduling model to maximise connectivity.•Considers operational restrictions, tail number and prior studies’ shortcomings.•Introduces a correction factor to adjust GCD and flight times for random factors.•Verifies with a large-scale multi-hub network with proven scalability and efficiency.•Highlights bank structure’s positive impacts on connectivity and challenges for hubs.

This study aims to investigate air travellers' Willingness to Pay (WTP) for green premiums , specifically focusing on their contribution to reducing carbon emissions generated by air travel. The research integrates the Theory of Planned Behaviour (TPB) and the Contingent Valuation Method (CVM) to estimate the monetary value that air passengers would be willing to pay for environmental initiatives. The TPB provides a theoretical framework to understand the psychological factors influencing individuals' intentions and behaviours, while the CVM allows for the estimation of the economic value of environmental goods. Drawing on the TPB, this study examines the influence of attitudes, subjective norms, and perceived behavioural control on air travellers' WTP for green premiums, while considering the determinants and barriers related to ecological goods, and sustainable consumption. The study investigates the potential economic implications of air travellers' willingness to pay for green premiums, particularly in the context of sustainable aviation fuel options and carbon-related fees. The findings of the survey of a sample of 248 respondents suggest a general willingness among passengers to pay for environmental premiums, notably carbon taxes, with variations in WTP influenced by demographics, travel preferences, environmental values, and awareness. Notably, younger travellers exhibit the highest WTP which is negatively related to the air ticket price. Higher environmental consciousness correlates with greater WTP. The impact of price perception and perceived efficacy of environmental initiatives were also found significant. Financial constraints and scepticism about the credibility of such premiums, however, limit some passengers' willingness to contribute.

Political conflicts between countries can disrupt normal functioning of the airline industry, leading to uncertainty and affecting airline demand (Dwyer et al., 2013). Empirical evidence shows that political conflicts have a dampening effect on airline demand (Zhang & Zhang, 2017; Laufer, 2018), and can results in a significant decrease in passenger traffic (Fernandes & Pacheco, 2017).



Airlines respond to political conflicts by implementing various coping strategies, such as route diversification, code-sharing agreements, and fleet renewal (Zuidberg & de Wit, 2020). For example, airlines may shift their focus to alternative destinations or establish partnerships with other carriers to expand their route options when facing reduced demand due to political instability (Button et al., 2016; Corbet et al., 2019). Understanding the impact of growing political conflicts on airline demand and management strategies is crucial as airlines serve as the primary transportation mode for domestic and international tourists.



However, research has largely overlooked the differential impact on distinct airline business models, such as full-service carriers (FSCs) and low-cost carriers (LCCs). This research note aims to address this gap by examining the effects of the China-Korea political conflict, specifically the deployment of the Terminal High Altitude Area Defense (THAAD), on FSCs and LCCs operating in South Korea in terms of flight numbers and seat capacity.

This study uses the Kano model and importance-satisfaction analysis (ISA) to assess airline service quality by identifying the prioritised service quality attributes (SQA) for business travellers. The study aims to produce suggestions for airline executives on how to allocate resources in the most effective way to enhance the quality of service and increase customer satisfaction. A conceptual framework divides business travellers into four Clusters based on the behavioural variables of flight length and cabin class. For each Cluster, business traveller expectations for fourteen SQAs were assessed through using the Kano model while integrating the ISA. The empirical phase employs a 38-item questionnaire that was shared on various frequent flyer and business travel forums. Additionally, this study utilises an adapted qualitative questionnaire where four airline managers expressed their perceptions on how they think business travellers perceive the fourteen SQAs. The analysis reveals four categories, namely 'concentrate here', 'keep up the good work', 'low priority', and 'possible overkill', exhibiting the importance and satisfaction of the fourteen SQAs. Findings show that resource allocation was adequate on only five attributes out of fourteen. The analysis of the airline manager responses shows differences in their assessment when compared to business travellers for two tangible attributes.

While most businesses actively adopt a data-driven approach for revenue management decisions, understanding how air travellers perceive and behave differently to pricing strategies is essential for yielding optimal financial outcomes. This study analyses the loss aversion and diminishing sensitivity mechanisms of prospect theory in economy and business cabin classes. With rich longitudinal airfares, regression models and revenue data (15,868 observations from the top-10 aviation routes in the world) from 2014 to 2019, this study finds that lower-(higher-)than-expected airfares have a positive (negative) impact on revenue. When the effect of loss-coded and gain-coded tickets were compared, the extent to which passengers avoided losses (vs. welcomed gains) had a greater impact on revenue, supporting that loss aversion applies to the airline revenue, especially for business passengers. This study contributes to the further refinement of prospect theory by showing that the loss aversion and diminishing sensitivity mechanisms manifest differently in each cabin class.

In this study, the operating environment’s attributes and its influence on the performance of airlines in Southeast

Asia are assessed through a comprehensive literature review and performance analysis. As a first step, a Pareto

Analysis is performed to assess the capacity contribution of registered airlines in the Southeast Asia region,

totalling 65 in 2019. Then, seven of the largest Southeast Asian airlines, representing 80% of total capacity in the

region, are taken forward into an in-depth benchmarking and Product and Organisational Architecture (POA)

performance analysis. The research pinpoints key differences between Full-Service Carriers and Low-Cost Carriers

in the region through a series of 13 metrics applied in the POA. It was found that the region’s FSCs scored

better at Product Architecture, which includes convenience, comfort and connectivity, whilst the LCCs strength

was in the Organisational Structure component, namely fleet and labour productivity, sales and distribution, and

airport attractiveness, especially in the case of AirAsia.

The world’s governments imposed a plethora of restrictions and quarantine rules to prevent the rapid spread of COVID-19. China was chosen for this study as it was the first market to be impacted. The overall aim of this paper was to analyse international air travel to and from China since the start of COVID-19 and to assess the impact of policy initiatives on seat capacity during this time. The key findings are that implementation of the so called Five one policy in March 2020 was associated with an almost immediate reduction in seat capacity on China to the rest of the world, partially suppressing the more typical impact of underlying GDP and air fares on capacity. It was further found that Chinese international gateways, as airports with substantial proportions of international and connecting traffic, remain the most distressed. Long haul international traffic and revenues from European and North American destinations all experienced unprecedented and sharp reductions. Traffic and revenues from other Asian markets was even more sporadic. Alarmingly, the study extracted that revenues from premium classes were deteriorating much faster than economy class, which is of imminent concern for long-haul carriers reliant on premium traffic coming into the pandemic.