prd airports competitions - education bureau · the school of decision sciences at hang seng...
TRANSCRIPT
PRD Airports Competitions
This project is funded by Hong Kong Central Policy Unit and Research Grants Council
2018
Collin Wong, Tommy Cheung
About Us
2
The School of Decision Sciences at Hang Seng Management College encompasses
science, engineering and business, with special emphasis on managing information.
We educate students on how complex business decisions are made using knowledge
and methodologies rooted in mathematics and statistics, computer science and
information management, and supply chain management.
scm.hsmc.edu.hk
About Us
Established in 2016, the Policy Research
Institute of Global Supply Chain undertakes
relevant, high-quality academic and policy
research in supply chain and logistics
management.
A major role of the Institute is to facilitate
communication between regional stakeholders,
sharing their mutual interests in advancing the
development of supply chain and logistics in the
region.
3
Media Coverage – Aviation Study
Economic contributions from the
Aviation industry
Hired 10 million people and generated US$2.7 trillion of GDP in 2015globally (IATA, 2016)
10% growth in inter-continental destinations by air transport leads toa 4% growth in business headquarters (Bel and Fageda, 2008)
Also, 10% increase in passenger enplanements in metro area leadsapproximately to a 1 % increase in employment in service-relatedindustries (Brueckner, 2003)
In 2012, Hong Kong International Airport (HKG) contributed HK$94billion of direct and indirect benefits to the local economy = 4.6% ofthe overall GDP (Hong Kong International Airport, 2017)
HKG provides over 73,000 direct employments, and over 75,000 ofindirect employments (Hong Kong International Airport, 2016)
5
Hong Kong Aviation Industry
6
Hong Kong vs. Guangzhou
2006 2016
Volume Rank Volume Rank
Hong Kong 44 Million 14 70 Million 8
Guangzhou 26 Million 42 60 Million 15
7
Source：南方都市报
PRD Aviation Development Plan
2 new airports and 14 expansion
projects.
Pearl River Delta Shinkansen
Airport (珠三角新幹線機場)
Zhanjiang International Airport
(湛江國際機場)
improves overall service
capacity
Strengthen the Guangzhou and
Shenzhen airports as major
international hubs
The World’s Annual Passenger Traffic
9
Slow Recovery -
Three years delay
10
Guangzhou &
Shenzhen are
catching up
11
Competition Among Airports in
Multi Airport Region
Not only compete for transit passenger traffic, but also strive to
attract passengers making a direct flight to destinations in their
overlapping airline markets.
Airport substitution often occurs in multi-airport region (MAR), where
passengers travelled to an airport further away to take advantage of
lower fares and sometimes better airline services (Fuelhart, 2007;
O’Connor and Fuellhart, 2016).
Passenger Choices
Passenger choices reviewed factors, such as exchange rate, fuel price,
airport access time, flight delays, airfare, passenger loyalty, in-flight
amenities, safety, and aircraft type.
A survey conducted by Loo (2008) when studying airport competition
in the Hong Kong-Pearl River Delta region (HK-PRD), China, suggested
that fares, access time, flight frequency and number of airlines were
significant factors in the airport choice of passengers.
Airports Competition in
Pearl River Delta Region
Analyze the impacts of the changes on
airport capacity among the different airports
in the PRD region.
Changes to an attribute in a given airport
city, such as GDP or the household income,
jointly affect the city’s airport capacity both
in that city and in all the other cities within
the region.
The process of catching up the competition
leader can be viewed as the major factor
contributing to the change of airport
capacity
The Development of Four Major Airports in PRD
HKG CAN SZX MFM
Degree-Jun11 138 156 90 25
Degree-Jun15 167 197 118 41
Degree growth (Jun11-Jun15, %) 21% 26% 31% 64%
Traffic-Jun11 2,069,250 1,561,573 1,003,211 164,569
Traffic-Jun15 2,659,811 2,142,467 1,568,191 248,649
Traffic growth (Jun11-Jun15, %) 29% 37% 56% 51%
Growth of the world: < 20%
General Statistics (Yearly)
YearHKG Seat Capacity
% HKG-International
CAN Seat Capacity
% CAN-International
MFM Seat Capacity
% MFM-International
SZX Seat Capacity
% SZX-International
2006 66,769,012 76.47% 40,358,283 16.09% 7,124,630 68.59% 27,832,851 2.42%
2007 70,109,475 75.87% 44,444,331 16.67% 7,648,450 69.97% 29,905,501 3.41%
2008 72,379,859 77.55% 49,406,790 15.59% 7,905,002 73.68% 32,363,727 4.09%
2009 68,204,799 78.47% 52,955,944 13.58% 6,347,803 77.35% 34,683,764 4.91%
2010 70,523,996 79.25% 59,393,715 14.10% 5,667,668 75.37% 38,636,113 4.87%
2011 77,711,504 79.34% 61,161,226 16.40% 5,675,401 68.35% 38,639,729 4.80%
2012 79,291,777 78.69% 65,642,999 17.57% 6,469,463 65.22% 41,732,730 4.82%
2013 82,522,757 77.08% 69,896,263 18.13% 7,470,135 62.31% 45,439,583 4.72%
2014 84,449,023 77.06% 73,187,459 17.92% 8,038,782 58.80% 51,413,563 5.01%
2015 87,194,903 78.24% 74,027,515 20.21% 8,876,766 60.28% 55,906,352 5.50%
Hong Kong Air Cargo Throughput 2001-2017
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inward
Outward
'000 tonnes
2017 has
increased by
150% as
compared to
2001 !
Air Cargo Throughput from 2010 to 2017
HK is still No 1 in the
cargo throughput.
Due to its high
efficiency.
It’s the most
important
transshipment port for
China
Air Cargo –Strong Competition
Shenzhen is a hub for Chinese express cargo airline SF Airlines, which has the largest freighter fleet of any express carrier in China. It saw a tonnage rise of 11.1% in 2016 - a trend which is likely coupled with e-commerce express volumes.
The Shenzhen airport also serves as an Asian-Pacific cargo hub for UPS Airlines.
CAN is the top three air cargo in China, with a cargo volume rise of 7.4% year-on-year in 2016.
HKG had a year-on-year growth of 3.3% in 2016, but 9.22% in 2017, due to transhipment traffic up by 14% y-o-y, while imports rose by 10%.
Runway Competition
The five major airports, all within 150km of each other, are all
expanding.
Guangzhou plans to add a fourth and a fifth runway by 2025 (the
3rd runway was in operation since 2015Q1, but it’s only used for
landing due to airspace issue with Foshan (佛山) airport).
Shenzhen is building its third runway (the 2nd runway was in
operation since 2011Q3).
Hong Kong aims to open a third runway by 2023 to boost
capacity to 100 million passengers a year.
Zhuhai and Macau Airports - with only one runway, their
capacity may need to be improved with the opening of the new
Hong Kong–Zhuhai–Macau Bridge.
SZX Capacity Utilization
Shenzhen airport – long been
a busy domestic hub, with 93%
of its seat capacity for
passengers flying within China
in 2016, but less than 4
million seat capacity for
international flights.
Shenzhen is also planning a
new terminal, with passenger
traffic just passed its 45
million capacity. 0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
2004 2006 2008 2010 2012 2014 2016 2018
SZX Passenger Traffic
Current Status
Guangzhou airport – had 22% (around 18 million) of its seat
capacity for international flights.
In 2017, it was China's third-busiest and world's 13th-busiest
airport by passenger traffic, with 65,806,977 passengers
handled.
Hong Kong's role as an international air hub was once highly
valued by Guangdong, which saw Hong Kong as its gateway
to the world cities.
CAN Capacity Utilization
Guangzhou's existing Terminal 1
was only designed to handle 35
million passengers a year, but a
second, bigger, terminal was
opened recently.
Expected to handle around 45
million passengers a year by 2020.
Total Passenger Capacity – 80
million.0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2004 2006 2008 2010 2012 2014 2016 2018
CAN Passenger Traffic
Current Status
HKG airport – almost 80% seat capacify for international
flights. 3rd runway is under construction and the three
runways won’t be in operation until 2024.
Macau airport – is only 1/10 of HKG airport total seat
capacity. However, it’s airport utilization is almost
reaching the limit due to terminal size.
The other airports (HKG, CAN and SZX) are all having
runway capacity constraints.
HKG Aircraft Movement Constraint
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2004 2006 2008 2010 2012 2014 2016 2018
HKG Aircraft Movement
420,000
Max movements
in the two
runway system
MFM Terminal Capacity
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2004 2006 2008 2010 2012 2014 2016 2018
MFM Passenger Traffic
7,800,000 with
new terminal
extension in 2018-
Feb.
Can handle only
6,000,000
before 2018
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
1 3 5 7 9 11
On Time Performance
HKG-2016 CAN-2016 SZX-2016 MFM-2016
Jan Mar May Jul Sep Nov
Capacity Growth of PRD airports from 2007 to 2016
HKG
Capacity growth
CAN
Capacity growth
SZX
Capacity growth
MFM
Capacity growth
Year International Domestic International Domestic International Domestic International Domestic
2007 4.4% 7.6% 11.0% 10.2% 46.8% 6.2% 9.8% 2.4%
2008 5.5% -3.7% 2.6% 13.1% 13.4% 8.1% 8.5% -9.3%
2009 -4.7% -9.6% -7.5% 10.0% 23.5% 6.6% -15.7% -30.9%
2010 4.4% -0.4% 17.3% 11.2% 9.1% 11.5% -13.2% -2.9%
2011 10.3% 9.6% 18.5% 0.4% 2.3% 0.0% -9.2% 28.7%
2012 0.9% 5.4% 14.7% 5.7% 9.3% 7.6% 9.0% 25.2%
2013 1.9% 12.0% 9.8% 5.8% 7.8% 9.4% 10.2% 25.0%
2014 2.4% 2.3% 2.9% 4.9% 20.0% 12.5% 1.8% 17.8%
2015 4.9% -2.0% 13.4% -1.9% 20.9% 8.1% 13.2% 6.4%
2016 4.1% 0.4% 19.2% 6.3% 28.6% 2.6% 11.1% -4.6%
Average 3.4% 2.2% 10.2% 6.6% 18.2% 7.3% 2.6% 5.8%
Common destinations competition of PRD
Airports
HKG CAN SZX MFM
Jun 11 Degree: 138 Common destination in degree (%) 59% 35% 17%
Jun 15 Degree: 167 Common destination in degree (%) 68% 38% 24%
Jun 11 Traffic: 2,069,250 Common destination in traffic (%) 82% 61% 58%
Jun 15 Traffic: 2,659,811 Common destination in traffic (%) 89% 60% 61%
Competition: Domestic and International
HKG vs CAN HKG vs SZX HKG vs MFM
Overlap Routes % Int’l Overlap Routes % Int’l Overlap Routes % Int’l
2006 72 43.06% 46 17.39% 29 44.83%
2007 77 46.75% 49 20.41% 33 57.58%
2008 84 47.62% 53 20.75% 38 63.16%
2009 83 49.40% 53 26.42% 38 60.53%
2010 81 46.91% 51 21.57% 36 58.33%
2011 92 51.09% 55 25.45% 34 47.06%
2012 95 48.42% 59 20.34% 34 50.00%
2013 108 50.93% 66 22.73% 44 43.18%
2014 113 51.33% 76 30.26% 45 48.89%
2015 120 50.83% 81 30.86% 52 51.92%
2016 114 54.39% 72 34.72% 47 51.06%
Competition: Domestic and International
CAN vs SZX CAN vs MFM SZX vs MFM
Overlap Routes % Int’l Overlap Routes % Int’l Overlap Routes % Int’l
2006 71 12.68% 22 31.82% 20 25.00%
2007 74 12.16% 31 51.61% 22 31.82%
2008 79 13.92% 33 57.58% 24 41.67%
2009 88 14.77% 33 54.55% 28 46.43%
2010 84 10.71% 32 53.13% 26 42.31%
2011 85 14.12% 33 45.45% 28 35.71%
2012 90 13.33% 33 48.48% 28 39.29%
2013 107 14.02% 44 43.18% 36 30.56%
2014 130 19.23% 45 48.89% 37 37.84%
2015 127 16.54% 49 46.94% 39 33.33%
2016 126 19.84% 47 51.06% 37 37.84%
Competition: Long vs Short Haul
HKG vs CAN HKG vs SZX HKG vs MFM
Overlap Routes Long Haul Overlap Routes Long Haul Overlap Routes Long Haul
2006 72 10 46 0 29 0
2007 77 10 49 0 33 1
2008 84 12 53 0 38 1
2009 83 13 53 0 38 1
2010 81 12 51 0 36 2
2011 92 20 55 1 34 0
2012 95 19 59 1 34 0
2013 108 20 66 0 44 0
2014 113 22 76 2 45 0
2015 120 22 81 2 52 0
2016 114 26 72 6 47 0
Competition: Long vs Short Haul
CAN vs SZX CAN vs MFM SZX vs MFM
Overlap Routes Long Haul Overlap Routes Long Haul Overlap Routes Long Haul
2006 71 0 22 0 20 0
2007 74 0 31 1 22 0
2008 79 0 33 1 24 0
2009 88 0 33 1 28 0
2010 84 0 32 2 26 0
2011 85 1 33 0 28 0
2012 90 1 33 0 28 0
2013 107 0 44 0 36 0
2014 130 2 45 0 37 0
2015 127 0 49 0 39 0
2016 126 4 47 0 37 0
HHI of PRD Airports (2006 to 2016)
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
2006Jun 2007Jun 2008Jun 2009Jun 2010Jun 2011Jun 2012Jun 2013Jun 2014Jun 2015Jun 2016Jun
HHI-International
HHI-Domestic
Collaborate with Airports in PRD- Bay Area
AirportPassenger-
Jun15Primary Secondary Local Minor
Average
cap per
flight
% of
destination
overlap (view
from LHR)
% of pax
volume
overlap (view
from LHR)
Deg Vol Deg Vol Deg Vol Deg Vol
LHR 6,444,907 64 1,974,577 66 766,023 41 276,942 41 193,547 206 - -
LGW 3,215,371 24 442,904 35 394,078 42 386,962 88 379,321 178 42% 34%
LTN 1,072,310 14 96,329 16 122,933 20 112,744 55 204,078 172 23% 10%
STN 2,009,861 8 111,408 14 145,523 30 251,684 111 498,816 180 20% 14%
LCY 364,741 13 79,486 7 34,684 20 19,822 20 46,064 80 14% 5%
AirportPassenger-
Jun15Primary Secondary Local Minor
Average
cap per
flight
% of
destination
overlap (view
from HKG)
% of pax
volume
overlap (view
from HKG)
Deg Vol Deg Vol Deg Vol Deg Vol
CAN 4,287,026 32 445,012 20 636,816 42 724,217 103 336,422 165 68% 71%
HKG 5,292,582 45 1,258,362 28 784,167 52 417,231 42 200,051 246 - -
MFM 502,644 6 56,996 10 99,414 16 44,359 9 47,880 167 24% 9%
SZX 3,135,580 6 250,561 12 514,132 31 579,484 69 224,014 159 38% 52%
ZHU 324,750 2 42024 7 49525 22 61378 8 9189 156 20% 6%
35
Determining Factors – from Statistical
Model Table : ML Estimation Results of Spatial Panel Regression
Model Coefficients Estimated ValueStandard
ErrorP-Value
𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 3.5143 0.9468 0.0002 ***
ln(𝐷𝑒𝑔𝑟𝑒𝑒) 0.1290 0.0406 0.0015 **
ln(𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒) -0.1361 0.0907 0.1333
ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.0173 0.0195 0.3740
ln(𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦) -0.0370 0.0128 0.0038 **
𝑟𝑢𝑛𝑤𝑎𝑦 0.0243 0.0137 0.0764
𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑢𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 0.0765 0.0384 0.0465 *
𝑊 × ln(𝐼𝑛𝑐𝑜𝑚𝑒) 0.0462 0.0180 0.0103 *
𝑊 × ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.0776 0.0240 0.0012 **
ln 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦𝑡−1 0.7924 0.0311 < 2.2e-16 ***
ln 𝐺𝐷𝑃𝑡−3 0.0524 0.0152 0.0006 ***
𝑙𝑛 𝐹𝑢𝑒𝑙𝑡−2 -0.0282 0.0154 0.0481 *
𝜌 -0.2365 0.0564 2.773e-5 ***
𝜆 0.4800 0.0673 1.008e-12 ***
𝜎2 0.0008
𝑅2 0.9817
Results Direct and spillover impacts on air traffics
Estimated Direct and Spillover Effects on Airport Capacity
Table 5 Estimated Direct and Spillover Effects on Airport Capacity
Direct Spillover Total
ln(𝐷𝑒𝑔𝑟𝑒𝑒) 0.1322*** -0.0279** 0.1043**
ln(𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒) -0.1395 0.0294 -0.1100
ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.0178 -0.0038 0.0140
ln(𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦) -0.0379** 0.0080* -0.0299**
𝑟𝑢𝑛𝑤𝑎𝑦 0.0249 -0.0053 0.0196
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 0.0784* -0.0165 0.0619*
𝑊 × ln(𝐼𝑛𝑐𝑜𝑚𝑒) 0.0473** -0.0100* 0.0373**
𝑊 × ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.0795** -0.0168* 0.0628**
ln 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦𝑡−1 0.8122*** -0.1714*** 0.6408***
ln 𝐺𝐷𝑃𝑡−3 0.0537*** -0.0113** 0.0424***
ln 𝐹𝑢𝑒𝑙𝑡−2 -0.0289* 0.0061* -0.0228*
Results
Direct and spillover impacts on air traffics
Direct Impact to Daily Capacity
Per Unit Change
Unit HKG CAN SZX MFM
ln(𝐷𝑒𝑔𝑟𝑒𝑒) 1 degree 72 56 53 27
ln(𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦) 1 flight -2 -6 -9 -1
𝑊 × ln(𝐼𝑛𝑐𝑜𝑚𝑒) 100 USD 11 34 23 1
𝑊 × ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.1 M 73 33 25 89
ln 𝐺𝐷𝑃𝑡−3 1B USD 46 52 36 39
𝑙𝑛 𝐹𝑢𝑒𝑙𝑡−2 1 USD -23 -18 -12 -2
Spillover Impact to Daily Capacity
Per Unit Change
Unit HKG CAN SZX MFM
ln(𝐷𝑒𝑔𝑟𝑒𝑒) 1 degree -13 -10 -10 -5
ln(𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦) 1 flight 0.41 1.27 1.92 0.18
𝑊 × ln(𝐼𝑛𝑐𝑜𝑚𝑒) 100 USD -2 -7 -4 0
𝑊 × ln(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) 0.1 M -14 -6 -5 -17
ln 𝐺𝐷𝑃𝑡−3 1 B USD -9 -10 -7 -8
𝑙𝑛 𝐹𝑢𝑒𝑙𝑡−2 1 USD 5 4 3 1
Managerial Implications
Capacity is auto-correlated and affecting other airports
negatively.
Despite having high capacity utilization, all PRD airports are
still expanding their seat capacity. Inevitably, as their
runway systems are required to handle more passengers,
they will have to handle larger aircraft.
Increase destination is the best weapon in the PRD airport
fight.
Managerial Implications
For the PRD airports, no major incentive programs were
provided. Instead, the respective governments have been
working diligently in signing open-skies agreements and
promoting overseas cities for business and tourism.
Population expansion and salary increment promote travels
of the region.
There are time delays for reflecting the effects of GDP and
fuel prices on capacity planning.
Increasing frequency on overlapped routes is detrimental
to airport’s traffic.
Who is the competitor? Who can collaborate?
Indirect effects of Degree on the PRD Airports
