Post-deregulation passenger selection of US airports

UoM administered thesis: Doctor of Business Administration

  • Authors:
  • Rex Hammond

Abstract

Abstract Airlines have endured a prolonged period of intense competition with the advent of deregulation in 1978. Market innovations and price-cutting dramatically expanded the number of travelers utilizing the national air transportation network. Bankruptcies and mergers reduced the number of contestants in the industry and eventually produced four national carriers controlling 80-85 percent of the passengers and routes. This new market power of the dominant airlines is resulting in industry changes designed to reduce operational uncertainty but is also having detrimental effects on many airports, particularly the smallest airports. This study employs qualitative and quantitative methods to explore the viability of the nation’s smallest primary commercial service airports. Three journal articles are fused in examining different aspects of the viability question. In Article 1, a longitudinal comparative analysis presents historic growth patterns for various sized airports during deregulation and reveals a distinctly lower growth rate for nonhub airports than their larger rivals. Even with a burgeoning market for travelers, growth for nonhub airports was anemic and the industry experienced massive passenger migration to the 60 largest airports. Article 2 addresses the topic of consumer switching, expands on extant literature with qualitative analyses, and proposes a theoretic, conceptual framework of four primary types of traveler purchasers. Each traveler type has its own distinct switching rationale and creates leakage patterns contoured to the features of their preferred airport. Building on the migration and switching findings of the first two articles, Article 3 explores converging market conditions and factors that are threatening future airline service for dozens of the smallest airports. By extracting findings from contemporary research, a comparative analysis of airports identifies 33 airports that face the highest risk of losing air service. The explanatory model places the airports in rank order by weighting various threat criteria. Qualitative interviews of air service professionals offer insider observations generally not known to the public, confirm observations found in existing research and verify that market forces are acting to reduce the number of airports in the network. The key contribution of the three articles of the thesis is its description of how key actors (firms, customers, agencies) interact and respond to policy decisions that have unintended consequences to small airports and their regional economies. There are predictable patterns in the relational linkages of these actors that contribute to our understanding of how a particular industry evolves under various pressures and how it interacts with factors outside the industry. The preponderance of the evidence from this study reveals that current market trends are generally caustic to the continued operation of small airports. Industry experts are reticent in acknowledging that the next phase of deregulation is underway with the consolidation of the nation’s nonhub airports.

Details

Original languageEnglish
Awarding Institution
Supervisors/Advisors
Award date1 Aug 2018