Route structure and productive efficiency in transpacific air services
Master of Arts
Bilateral air service agreements have determined the nature of international air services through regulation of entry, service quality and pricing. Negotiations for such treaties reflect each government's aim to gain at least an equivalent right before granting certain traffic rights to the other party. Given these negotiated rights as endowments, each airline determines its strategies within the designated market. Station routing models and profit functions identify each firm's strategies. Using stage length as a proxy for network type, efficiency forecasting of stochastic frontiers measures productive efficiency for three primary transpacific airlines. The inclusion of input and output prices accounts for relative costs and revenues. Results indicate that international route structures must be linked to an extensive domestic route network in order to exhibit high productive efficiency. Changes in relative costs through exchange rate fluctuations furthermore reflect the vulnerabilities in the international trade of services.
Economics, Commerce-Business; Political science; International law; International relations; Transportation