Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Passengers’ Choice of LCC within MARs: A Case Study
of Hong Kong and Shenzhen Airport
Peter C WONG1
LCC has become a popular travel mode in recent decades, because as
general perception, their main attraction to passengers is low airfares. This
paper uses the AHP method to study the selection of LCC and airports in the
PRD region.
Field of research: Management: Supply Chain Management
1. Introduction
The Low Cost Carrier (LCC) segment has grown rapidly and this growth has
been coincident with the reform of many airports. Airports around the globe
have carried out changes and new LCC terminals have been constructed –
which specifically cater to the needs of LCC operators.
Besides receiving strong support from most leisure travellers, LCC operators
are also able to collaborate with many soft service providers – such as tour
companies and travel groups, to increase passenger flow to airports. This is
significant for some secondary airports because they were previously at the
mercy of Full Service Carrier ( FSC ) operators.
Some airports that are located close to other airports in multi-airport regions
(MARs), such as the Pearl River Delta (PRD), face direct competition from a
clearly-defined and established airport catchment area. Passengers within
MARs have the choice of many airports and will base their decisions not only
on total travel time and proximity but also other airport level-of-service (LOS)
attributes.
This paper will discuss the factors that affect the choices of LCC passengers in
MARs.
2. Literature Review
The potential passenger load carried by LCCs was greatly underestimated
initially. Most FSC operators expected LCCs to operate in different market
segments. However, with high service frequency and comparatively lower ticket
prices, LCCs have gradually lured many business travellers away from using
FSCs to their services.
The LCC segment has grown rapidly and this growth has been coincident with
many airports building terminals specifically catering to the needs of LCC
operators.
1 Dr. Peter C WONG, Department of Logistics and Maritime Studies, Faculty of Business, The
Hong Kong Polytechnic University, Hong Kong. Email: peter.c.wong@polyu.edu.hk
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Besides enjoying the support of most leisure travellers, LCC operators are also
able to collaborate with many soft service providers – such as tour companies
and travel groups, to draw additional passengers to their airports (Jarach 2005).
In addition, LCCs also attract business travellers due to the high traffic density
on their routes. This is significant for secondary airports because they were
previously dependent on the FSC operators.
Research on airline choice in past decades, including Proussaloglou and
Koppelman (1995, 1999) and Yoo and Ashford (1996) indicates the main
factors affecting choice are: carrier service, flight schedule and fare class. In
addition, they also found factors such as trip purpose, origin and destination,
scheduling of activities and timing of booking requests, vital in their studies.
Ong and Tan (2010) suggest that consumer socio-demographics (ethnicity and
education level) and behavioural choices (concerns over schedules and
airfares, routes, booking methods and purpose of journey) are important
determinants of airline choice. However, consumers do not separately choose
an airline and an airport but rather choose among imperfect airline–airport
substitutes. Secondly, the way passengers decide between airline and airport
attributes depends on whether they travel for business or leisure purposes (Ishii
et al 2009). Hess (2007) studies air travel behaviour by making use of Stated
Preference (SP) data collection and the results retrieved from SP data show
the importance of ground-level distance in airport-choice behaviour.
Proussaloglou (1999) examines passengers’ choice model on air carrier, flight
and fare class. This quantifies the trade-off between airfare, schedule and
frequent flyer programs for business and leisure travellers. The results show
that leisure travellers are more sensitive to airfare changes than business
travellers, which is consistent with the results of other similar research. This
research also quantified the value of the different service attributes of each air
travellers’ group.
The introduction of low fare carriers to a wide range of markets throughout
various regions and the reduction of market information asymmetries between
airlines and consumers are two of the most important changes in the aviation
industry (Economist, 2005; Francis et al., 2004; Morrison, 2001; Vowles, 2000).
As a result of these spatial asymmetries of information, the general mobility of
the population and the ease with which fares and other travel options can be
compared not only among competing airline service providers but also between
alternate origin and destination airports, the study of airport choice, regional
market areas, and market area leakage has taken on increased importance in
the study of air transportation networks (Basar and Bhat, 2004; Fuellhart, 2003;
Hess and Polak, 2005a,b; Suzuki et al., 2004). The area leakage of
passengers (Suzuki and Audino 2003) will occur when travelers ‘‘avoid using
the local airports in their regions, and use other (out-of-region) airports to take
advantage of lower fares and more convenient airline services’’. Such
substitution can obviously occur either in relation to the departure airport,
destination airport, or sometimes even both.
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Some airports that are located closel to other airports in multi-airport regions
(MARs), such as the Pearl River Delta (PRD), face direct competition from a
firmly established airport catchment area. Passengers within MARs can
choose among different airports not only based on total travel time and
proximity but also on the level-of-service (LOS) attached to that particular
airport.
The increased accessibility of an airport may increase its attractiveness and
hence a bigger market share (Pels, Nijkamp & Rietveld 2000). This may lead to
a redistribution of an airline’s traffic and airfare, as they can only increase their
market share by adjusting the frequency and prices of their flights. This
suggests that increased of airport accessibility may not greatly benefit all
airlines.
Pels et al (2001) analysed the sensitivity of access time and schedule
frequency to the choice of airports in MAR and airlines. It is observed that
passengers will generally accept a lower average flight frequency of an airport
with a low fare. The low fare airlines can also encourage passengers to tolerate
longer access time to the airports. Pels (2009) also analysed the LCC and
airport competition in the Greater London area and observed that business
travellers are more sensitive to frequency changes and that leisure travellers
are more flexible when it comes to fares.
Conversely, Fuellhart (2007) suggests that airports do not have much control
over local transport connections, road networks, routings, ticket prices and use
of type of aircraft etc. Passengers may become settled in their choices and stop
checking for alternatives. In addition, an effective advertising campaign can
attempt to appeal to passengers and help them recall choices that they may
have forgotten. This may result in passengers reconsidering alternative airports
around them. Access cost is less important than access time in the joint airport
access mode choice ( Pels et al 2003). Business travellers are more sensitive
to access time than leisure travellers and it plays a more important role in
marginal decisions between airports for business travellers.
Suzuki (2007) shows that travellers often choose airlines first in their decision
making process, but do not eliminate airport options. In the choice of airlines
and airports however, distance to final destinations may impact on the
travellers’ decisions. Hence, a traveller tends to choose the airport that: (1) is
close to home, and (2) has been used by the traveller in the past. Similarly, a
traveller tends to choose the airline that: (1) offers lower fares, (2) provides
frequent services to the traveller’s destination, and (3) the traveller is an
‘‘active’’ FFP member of. These results are consistent with those of previous
airport and airline choice studies.
3. Methodology
A group of passengers will be identified and invited to take part in this study.
The key parameters collected from the literature will then be used to measure
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
the airport preference of passengers that are going to use LCCs through the
use of the Analytic Hierarchy Process (AHP).
The AHP developed by Saaty (Saaty, 1983) provides a powerful tool that can
be used to make decisions in situations where multiple objectives are present.
The main theme is the decomposition by hierarchies and synthesis by finding
relations through informed judgment. Scholars such as Tsaur et al (2002), Liou
and Tzeng (2006) and Park et al (2009) have conducted successful airline
service related studies with the AHP method and they demonstrated that the
AHP is a suitable method in both subjective and objective selections.
The factors relating to carrier and airport selection are listed in table 1 after
several focus groups were conducted.
Table 1: Selection factors
1.
2.
3.
4.
5.
6.
Airline
Airfares
Flight schedule
Airport of origin
Airport of destination
Network
Methods of ticket purchase
(airline website, travel agents,
online travel agents (ZUJI),
company arranged)
1.
2.
3.
4.
5.
6.
7.
Airport
Time required to access the
airport
Cost of accessing the airport
Total travel cost (Cost to access
the airport, airport charges,
airfare, extra surcharge)
Choice of airlines
Airline schedule
Airport tax or passenger charge
Airport experience
The above factors were then made into a questionnaire and a survey was
carried out. A particular location (Sheung Shui MTR station) was selected so
that the choice of airport could be determined in a more rational manner ( see
table 2).
By BUS
By Rail
Table 2: Total Travel time ( minutes)
HKG
SZX
100
106
120
104
CAN
370
200
The three airports that are included in this study are Hong Kong International
Airport (HKG), Shenzhen Bao’an International Airport (SZX) and Guangzhou
Baiyun International Airport (CAN). The flight-schedule information of the LCC
operating in the airports, was collected ( Table 3). The data indicates that only
Tiger Airways and Air Asia operate in all three airports.
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Table 3: LCC operators at both airports
Destination served
Country
City
Airline
HKG
SZX
CAN
√
√
Singapore
Singapore
Tiger Airways
√
Australia
Perth
Tiger Airways
√
Philippine
Manila
Tiger Airways
√
China
Two
Spring Airlines
√
√
China
Shanghai
Juneyao Airlines
√
√
Australia
Three/two
Air Asia
√
√
Indonesia
Four/two
Air Asia
√
√
Malaysia
Three/two
Air Asia
√
√
New Zealand
Christchurch
Air Asia
√
Thailand
Two /Bangkok
Air Asia
√
Brunei
Bandar
Cebu Pacific
√
Cambodia
Siem Reap
Cebu Pacific
√
Philippines
eight
Cebu Pacific
√
Malaysia
two
Cebu Pacific
√
Macao
Macao
Cebu Pacific
√
Japan
Osaka
Cebu Pacific
√
Indonesia
Jakarta
Cebu Pacific
√
China
four
Cebu Pacific
√
Singapore
Singapore
Jetstar
√
Australia
seven
Jetstar
√
Cambodia
Phnom Penh
Jetstar
√
China
three
Jetstar
√
Indonesia
four
Jetstar
√
Malaysia
two
Jetstar
√
Myanmar
Yangon
Jetstar
√
New Zealand
two
Jetstar
√
Philippines
Manila
Jetstar
√
Taiwan
Taipei
Jetstar
√
Thailand
two
Jetstar
√
√
√
√
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Vietnam
Two
Jetstar
√
Philippines
Cebu
Airphil Express
√
Korea
two
Jeju Air
√
Korea
Seoul
Jin Air
√
Sources: airport websites
A group of Hong Kong travellers (mainly from my daytime and part time
MSc/BBA students) were interviewed. The total number of interviews was 160
entries with 126 valid cases) and 64% of the valid cases were classified as
leisure travelers as they travel with LCCs less than two times per year. The
choices of Hong Kong travellers for this survey were mainly influenced by the
ease and time required to cross the border.
Air Asia
Tigerair
Table 4: Sample Airfares
SZX - KUL
CAN - KUL
HKG - KUL
SZX - SIN
CAN - SIN
HKG - SIN
USD178
USD376
USD264
USD244
USD285
USD210
An online booking on these two airlines was carried as indicated in table 4.
Meetings were set up with each group during the survey period. Interviewees
were required to finalise and reach a unanimous decision of their choice.
4. Findings and analysis
With all the parameters selected, an AHP diagram (Fig 1) was compiled to
outline all the factors which came under consideration.
Figure 1 AHP diagram
6
Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Each criterion was given a Likert scale of 5: Trivial; Unimportant; important;
Very Important and Critical. After discussion, the leisure travellers group ranked
each criterion according to the above scale.
The result of airport selection for leisure travellers is as follows:
Figure 2: Leisure Travellers preference
The result of airport selection for business travellers is as follows:
Figure 3: Business Travellers
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
Table 5: The Sensitivity weights for the airport
Leisure Traveller
Business Traveller
Airline
Airport
Airline
Airport
SZX
0.254467
0.168422
0.157346
0.154529
CAN
0.149031
0.168798
0.145003
0.159129
HKG
0.0965025
0.16278
0.197651
0.186342
Table 5 clearly indicated for leisure travellers, the selection of airport is
unimportant but the airfare was vital. In addition, the surface access of SZX
airport was 1.78 times better than CAN airport. Business travellers, as
expected, picked HKG airport as it provides a better schedule and higher
frequency of service.
5. Summary and conclusion
In this study, the selection of airline is confined to LCCs that serve all selected
airports within the region, thus avoiding a complex process involving comparing
parameters such as airline network, flight connection, flight schedule etc. as
LCCs operate a point-to-point service.
The location of home/office was chosen so that it takes more or less the same
time to access both SZX and HKG. A different location may have yielded
different results.
This study only covers the travel behaviour of Hong Kong residents, as it is
easier for them to cross the border between Shenzhen and Hong Kong. The
time required to cross the border is short and thus aggregate surface access
times were not affected. If mainland residents were to be included, then the
time taken for them to cross the border would invariably be longer due to
complex customs and immigration regulations.
The study indicates that surface access was one of the major factors within an
MAR in selecting the airport as CAN was not considered in both LT and BT
sectors.
For leisure travellers, airfares was a vital factor so they chose SZX for their trip.
In the case of Tigerair, the selection of SZX may have been due to the
departure time of their flight. Business travellers with a wider choice picked
HKG as there are more flight departures than SZX and CAN.
There are some areas for further study such as why Tigerair has a USD70
difference for HKG and CAN airports and why Air Asia has an airfare difference
of USD198 between SZX and CAN.
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Proceedings of 4th Global Business and Finance Research Conference
25 - 27 May 2015, Marriott Hotel, Melbourne, Australia
ISBN: 978-1-922069-76-4
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