Telecommunications industry efficiency: A comparative analysis of high and middle income countries

This study evaluates telecommunications industry efficiency in 19 countries grouped into high income countries (HICs) and middle income countries (MICs). Using data from 2001 to 2013 and a two-stage Data Envelopment Analysis (DEA), it finds that HICs outperformed MICs, however, the two groups of countries exhibited improved technical efficiency, managerial effectiveness, and operational scale. Additionally, time in deregulation is negatively associated with technical and scale efficiency in HICs, however, the influence is insignificant in MICs. Labour productivity drives technical efficiency in HICs. Also, it augments managerial resourcefulness in HICs and MICs, however, its influence on scale efficiency is immaterial. Revenue per subscription enhances technical efficiency and managerial effectiveness in the two groups of countries. The relationship with scale efficiency, which is positive in HICs is irrelevant in MICs. Capital intensity has insignificant influence on managerial effectiveness in the two clusters of countries, however, it undermines technical efficiency in HICs and scale efficiency in MICs. Gross national income per capita is inconsequential to scale enhancement. However, it contributes to technical efficiency in the two categories of countries and drives managerial performance in HICs. Efficiency performances in HICs and MICs are insensitive to the industry's concentration level. Inflation has insignificant influence on scale efficiency in HICs and MICs. Although, it drives technical efficiency and managerial performance in MICs, the influence in HICs is immaterial. The joint impact of labour productivity and capital intensity is irrelevant to operational scale in HICs and MICs, however, it is negatively associated with technical efficiency and managerial effectiveness in MICs. This empirical study provides additional insight that managers in the industry and policy makers will find useful during strategy formulation and policy deliberations

Duopoly Competition between Airline Groups with Dual-brand Services - The case of the Australian domestic market

The Australian aviation industry achieved substantial growth after the abolition of the “two-airline-policy” in 1990. With Virgin’s purchase of Tiger Airways, a new duopoly between two airlines groups, each consisting of a full service airline (FSA) and a low cost carrier (LCC), emerged in the domestic market. In this study, we analyze the pricing dynamics among the four airlines of the duopoly groups, using panel data of online fares on the four most travelled routes in the domestic market. Our empirical results suggest that market segmentation allows the FSAs to charge significantly higher prices than the LCCs. Still, there is clear evidence of competition within and across the market segments, and the airlines’ pricing responses are asymmetric. Virgin’s price responses to Qantas and Jetstar are moderate. In comparison, more than one third of Qantas’s fare changes and less than half of Jetstar’s fare charges are in response to Virgin’s fare adjustments in the previous period. Despite Qantas and Jetstar’s large market share, after lengthy and costly price wars in previous years, the Qantas group still responds to Virgin as if competing with an entrant. All four carriers adopt revenue management practices, but the pricing of Qantas and Jetstar does not seem to be coordinated. Our study identifies a complex competition pattern between airline groups offering dual-brand services, and suggests that the Australian domestic market has not reached a stable equilibrium

Air Transport Services in Regional Australia – Demand pattern, frequency choice and airport entry

This study investigates the development of the aviation market at Australia’s top 50 regional airports during 2005-2013. Demand estimation results suggest that a higher commodity price increases traffic volume in markets where the local economy heavily relies on mineral resources and that an appreciation of the Australian dollar decreases passenger flows in tourism-dependent areas. The presence of leading airlines and low-cost carriers, and the availability of international services all contribute positively to market growth. Airport entry analysis reveals that major carriers engage in clear strategic interactions. The Qantas airline group has used Jetstar as a fighting brand, thus that Jetstar flies to a destination if and only if the regional airport is also served by Virgin Australia, the group’s major competitor. Unlike routes connected to major airports, demands in regional airports are not sensitive to flight frequency, but seem to be positively influenced by national fare levels. Our empirical results support a consistent aviation policy across Australia, especially for issues related to airline competition and demand stimulation. However, special considerations need be made for regional airports to help them to deal with economic shocks and cover fixed costs

Merger between airlines in financial distress: does the merger save them?

The merger in 2009 between China Eastern Airlines and Shanghai Airlines came at a time when both airlines were suffering heavy losses, and were struggling for survival during the global financial crisis. An examination of the prices on China Eastern’s seven domestic Shanghai-based routes suggests that on average fares on departure days have increased by 22% in the post-merger period. It appears that the 2009 merger conferred China Eastern with significant market power owing to the parallel nature of this acquisition, thereby resulting in record profit reported in 2010. This reminds regulatory authorities to remain vigilant in handling airline mergers when numerous parallel routes are involved

COVID-19 and bailout policy: the case of Virgin Australia

The impact of COVID-19 on air transport is unprecedented and some well-known airline brands may disappear as a result. Governments around the world have responded swiftly to cushion the financial impact by offering direct wage subsidies, tax relief, loans, etc. This paper explores the government’s appropriate responses to failing airlines’ bailout request by examining the case of Virgin Australia. Following the bailout policy principles established in the literature, we suggest that bankruptcy protection should be considered as the first solution to a failing carrier. A bailout decision should be guided by a set of principles and procedures, which should not be taken lightly. Our analysis also shows that the government cannot take a hands-off approach in the absence of private lenders and investors, as the costs to consumers and regional residents would be huge, at least in the short run, if the carrier could not get through the COVID-19 pandemic. A minimum level of assistance with conditions might be needed to maintain market competition

A review of connectivity utility models and their applications

This chapter reviews the construction of the Connectivity Utility Model (ConnUM) that measures an airport, a city, or a country’s transport connectivity. A simple measure accounting for direct air connections is first discussed, followed by an indirect air connectivity measure that considers indirect connections, and an extended multi-modal ConnUM that considers a transport network formed by multiple transport modes. We then use the model to show how China connects the world, i.e., foreign countries’ direct and overall air connectivity with China. It appears that there is a strong link between air connectivity, and international trade and tourism. This chapter has also demonstrated the usefulness of the ConnUM in conducting the vulnerability analysis of a country’s transport network

Understanding airline price dispersion in the presence of high-speed rail

This paper examines the price dispersion among China's “Big Three”, namely, Air China, China Eastern and China Southern in the presence of high-speed rail (HSR). It has been found that HSR is positively and significantly associated with airline price dispersion on the long-haul routes, which may suggest that the presence of HSR can facilitate airline cooperation in setting prices and outputs, thereby leading to greater price dispersion. However, on the short-haul routes where HSR is highly substitutable, the HSR competition effect dominates, and smaller price dispersion is observed. All the market structure and competition variables included in this study support the conclusion that price dispersion is greater in more concentrated and more densely travelled markets. The contribution of airline cost to price dispersion is limited

Measuring air connectivity between China and Australia

This paper assesses air connectivity between China and Australia for the period 2005–16 using a Connectivity Utility Model. Our direct connectivity measure shows that as a gateway city, Sydney continues to play a key role in facilitating the movements of people and goods between China and Australia. Guangzhou has become the city best connected with Australia since 2011 as measured by direct connectivity. When indirect connections are considered, the largest increases in overall connectivity from 2005 to 2016 can be observed among Australia's major capital cities, particularly Sydney, Melbourne and Brisbane. Chinese carriers are the key drivers behind the increases. There have been rises and falls for airports serving as a hub between China and Australia. Guangzhou has forged its strong status as a transfer hub between Australia and China thanks to the quick expansion of China Southern. The gaps between Guangzhou and other transfer hubs measured by hub connectivity have widened since 2010

A comparative study of airline efficiency in China and India: A dynamic network DEA approach

Using a dynamic network DEA approach, this research examines the efficiency performance of major Chinese and Indian air carriers with a consideration of the airline's internal processes and links as well as the carry-over items that connect consecutive time periods. It is found that two low-cost carriers (LCCs), namely, China's Spring and India's SpiceJet were the most efficient carriers during the period between 2008 and 2015. China's three state-owned airlines performed poorly in both the capacity generation and service stages, particularly the latter. The second-stage regression results confirm that the LCC model and private ownership are significantly associated with better airline efficiency performance. This paper thus calls for continual reforms in China's air transport including further privatisation and policy support for LCCs and private carriers to improve the overall efficiency of this industry

CEO promotion, relative performance measures, and institutions in an emerging market: evidence from China’s listed state-owned enterprise

This paper investigates CEO turnover and the usefulness of relative performance evaluation (RPE) as a management incentive in an emerging economy lacking market-based competition. In a sample of China’s listed state-owned enterprises (SOEs) from the period 2001-2005, we find that 41% of departing CEOs in SOEs is being promoted. The promotion is positively associated with preceding firm performance relative to peers in the same region and this association is more significant than that between the promotion and firm’s specific performance. Furthermore, the promotion outperforms other incentive schemes such as CEO demotions by 5%-8% in terms of subsequent Tobin’s Q in three years. These consequences persist in undeveloped regions where there are fewer firms listed on the stock market, a lower stock market capitalization, or a higher regional Herfindahl-Hirschman Index. The findings imply that promotion based on RPE provides a critical incentive by creating competitions