Transportation

 Identify the Classification of Tourist Transport

 Understand the air transport and airline industry

 Discuss the Australia Airline Market

 Discuss the challenges in the 21st century

 Discuss the emergence of the Low-Cost Carrier

Sector
 A tourism system

Outbound tourist flow

Tourist
Tourist
generating
area
Tourists travelling destination

Returning tourists flow

(adapted from Page, 1994)

 Transport contributes to international and
domestic development of tourism
 Global changes affecting travel for tourism
a) Columbus set sail in 1492 and other
exploration till 1800s
b) Development of global trade of products and
services
c) Rise of web technologies allow businesses to
collaborate globally from late 1990s

(Friedman, 2005)
 The Railway Age – developed from 1840s where private sector
investment was employed to develop land-based transport
except during WW I
 The Age of Protection – road transport emerged and unplanned
car and coach travel developed during 1920s and 1930s
 The Age of Administrative Planning – national passenger
network to ensure national efficiency as railway companies were
less efficient after WW II
 The Age of Constestability – deregulation to achieve greater
efficiency and to reduce public subsidies in the US (1970s) and
UK (1980s)
 The Age of Public-Private Partnerships – private sector to
manage the transport infrastructure in 1990s

(Page, 2003)
 Ryan (1991) identified common tourist travel motivators
excluding business travel:
a. desire to escape
b. pursue relaxation and recuperation
c. opportunity to play
d. strengthening of family bonds
e. prestige or gain social enhancement among peers
f. social interaction
g. educational opportunities
h. wish fulfillment
i. shopping
 Tourism motivation is a part rather than be equated
with tourism motivation.

 Tourism demand is the outcome of tourists’

motivation, marketing, destination features and
contingency factors such as money, health related to
traveller’s choice behaviour.
 3 modes of transport

1. Water – cruise ships, ferries, scheduled

passenger ships

2. Land – car, bus/coach, train, caravan

3. Air – scheduled services, charter flights

(Collier, 1994)
1. Water-based transport
- cross water (ferries), for pleasure on inland waterways (canal boats) or
mode of tourist travel (cruising)
- P&O shipping company developed water-based transport as a means of
travelling between continents
- Cruising is a popular activity and number of berths operated by cruise
ship companies was 241000 in 2000, a 10.8% increase on 1999 and
carried 100m passengers, a 10% growth
- 3 leading cruise firms:
a. Carnival Corporation (28% market share)
b. Royal Caribbean International (22% market share)
c. P&O Princess (12% market share)

(Page, 2003)
1. Water-based transport
- Ferries are more functional modes of tourist transport used to
cross stretches of water led to the opening of the Channel
Tunnel.
- Due to competition from Eurotunnel and low-cost airlines, ferry
operators add value to their services by upgrading on-board
facilities, particularly F & B, children’s lounges and business
lounges, and increase capacity to 2000 passengers
- The Norfolk Broads shows that inland waterways offer a good
alternative to transport tourists

(Page, 2003)
2. Land-based transport
- Dominant mode of travel for many domestic trips
- A) Car
# car ownership, ease of access, upgrading of roads led to more
travelling by car to countryside e.g. 103 million visits to National
Parks in the UK in 1991 (Countryside Commission, 1992)

# car hire business dominated by Avis, Budget, National and

Hertz in the lucrative markets in France, Germany, Italy, Spain
and the UK

(Page, 2003)
2. Land-based transport
- B) Bicycle
# Motivations for cycling include; keeping fit, having fun, fresh air and
access to the countryside (Country Commission, 1995)

#Lumsdon (1996;1997) shows that leisure cycling is a high-quality way

to enjoy the countryside. Cycle tourism has great potential for growth.
3 market segments:
a) holiday cyclists – couples, families, friends seek a holiday and likely
to use own bikes or hire and cycle 25-40 miles daily
b) short-break cyclists – seek to escape and travel in groups and cycle
25-40 miles daily
c) day excursionists – casual and leisure cyclists and ride 15-25km. Use
own bikes and form 25-30% of the segment

(Page, 2003)
2. Land-based transport
- B) Bicycle
# SUSTRANS (2002) identified the 4 market segments for cycle
tourism trips:
i) infrequent leisure cyclists – packaged cycle touring holidays
ii) occasional leisure cyclists – day cycle rides (20-25 miles)
iii) frequent leisure cyclists – day cycle rides (30-35 miles)
iv) cycling enthusiasts – day cycle rides (40-50 miles) and
independent cycle touring holidays

# UK Leisure Day Visits Survey found that average cycle day trip
is 62.9km (39.3 miles) in length, 3.6hours in duration and a
party size of 4.6
(Page, 2003)
2. Land-based transport
- C) Coach and bus travel
# Bus trip is 24km or less, whereas a coach trip exceeds 24km
# 3 classifications of international coach travel market (The
European Conference of Ministers of Transport (1987):

a. Scheduled services (lines) – Express coach services and

operated by consortia of companies or individual operators
b. Shuttle services – transport a group of tourists from same
departure point to the same destination and involves
accommodation for the group. Also known as holiday shuttles

(Page, 2003)
2. Land-based transport
- C) Coach and bus travel
# 3 classifications of international coach travel market (The
European Conference of Ministers of Transport (1987):

c. Occasional services – range of different services;

i) closed-door tours – one vehicle used for entire tour
ii) day excursions e.g. city tour
iii) extended tours or coach holidays
iv) airport shuttle services
v) urban excursions e.g. buy day ticket for hop-in bus such as
Guide Friday in the UK
vi) private hire (education or group outing)

(Page, 2003)
2. Land-based transport
- C) Rail travel
# Railways provide an important means of moving tourists and
leisure trippers between countries
# The rail business generates 75bn euros, employs 1 million and
invested 250mn euros in research and development
# The growth in European rail travel lies in the high-speed rail
services
# Rail in relation to tourism and leisure travel include;
a. mode of transit to tourist accommodation in nearby city
b. rapid transit systems and metros to travel within city
c. city-to-city journey typically for business or leisure travel
d. local rail services outside urban areas during peak hours
# rail travel outperformed by air-and car-related travel
(Page, 2003)
 Air Transport Industry consists of

1. Consumers
a) Freight e.g. freight forwarder
b) Passengers e.g. leisure, business, educational
2. Producers
a) Government e.g. regulation, aviation bodies
b) Airlines e.g. Qantas, SIA, Cathay Pacific
c) Aviation services e.g. insurers, maintenance
d) Airports e.g. terminals, catering, air traffic, control
e) Manufacturers e.g. Boeing, Airbus
(ATAG, 2000)
 Annual Passsengers Average annual rates
(millions) of growth
1985 1999 2014 1985-1999 1999-2014

China 15.4 69.6 214.7 11.4 7.8

Japan 60.1 139.5 195.8 6.2 2.3
Taiwan 10.7 52.4 101.1 12.1 4.5
South Korea 7.5 38.4 83.0 12.3 5.3
Hong Kong SAR 9.3 29.1 71.4 8.5 6.2
Thailand 6.8 25.7 59.3 10.0 5.7
India 13.4 24.4 57.5 4.3 5.9
Singapore 8.6 21.7 51.4 6.8 5.9
Malaysia 6.7 18.4 39.3 7.5 5.2
Indonesia 5.0 1.2 27.2 50.9 6.1
Philippines 6.4 9.0 20.9 37.9 5.8
Vietnam 0.1 4.3 19.2 29.5 10.5

(ATAG, 2001)
 Limited growth in the world market for air travel as
many markets have matured
 Asian international traffic will increase from 32.5% in
1999 to 36.1% by 2014
 China is a key driver of Asian aviation demand as its
traffic volume increase from 9.9% in 1985 to
expected to grow to 24.6% by 2014
 Other key drivers:
a) short-haul high density routes e.g. Singapore-
Kuala Lumpur and Bangkok
b) medium-haul routes especially North Asia
c) long-haul routes between Europe, USA, Pacific
region and South East Asia
(ATAG, 2001)
 The airline industry is unstable due to external
factors and internal developments

 It is marginal and cyclical as airlines enjoyed 5-6

years of profits followed by 2-4 years of declining
profits or even losses

 Cyclical downturn events such as 9/11 attack in the

USA, invasion of Iraq in spring 2003 and SARS
epidemic, and escalating oil prices in 2004
 Other factors include continued liberalisation and
‘open skies’, global alliances, new low-cost
carriers, on-line selling and distribution, and
privatisation of state-owned airlines

 IATA expects the US$630b airline industry to net

profit of US$4.1b in 2012 but lesser than US$8.4b
achieved in 2011 (reuters, 2012)

http://www.reuters.com/article/2012/10/01/uk-ia
ta-outlook-idUSLNE89001920121001
 Liberalisation e.g. Asiana, Virgin Atlantic, ANA

 Low oil prices (US$20-$33/barrel)

 Decline in traffic growth rates (2% growth in 2004

compared to 4.8% in 1997)

 Growth of East Asian/Pacific airlines (Japan, SIA,

Korean, Cathay and Qantas)

 Decline in yields due to liberalisation, competition

(Doganis, 2006)
Ranking Ranking Group/ Airline Country Revenue
(2011) (2010) ($m)
1 1 Lufthansa Group Germany 40,164
2 2 United-Continental Holdings USA 37,110
3 3 Delta Airlines USA 35,115
4 4 Air France-KLM Group France 34,109
5 5 FedEx Express USA 26,515
6 6 AMR USA 23,979
7 7 International Airlines Group UK/Spain 22,839
8 9 ANA Group Japan 17,897
9 10 Emirates Group UAE 16,958
10 14 Southwest Airlines USA 15,658
13 13 Qantas Australia 14,842
18 18 Singapore Airlines Group Singapore 11,896

(World Airline Rankings Financial, 2011)

 Most airlines are working in some of these areas:
a) Transportation (short haul, long haul routes)
b) Communication (meet clients)
c) Leisure (vacation)
d) Logistics (supply-chain)
e) Information (emails replacing paper)
f) Selling Services (airport ground handling)

(Doganis, 2006)
 Will a trip be made at all?

 What mode of transport?

 For air trips, what class of service will be purchased?

 Which airline will be chosen?

(Doganis, 2006)
Issues
a) Frequency and timing (e.g. day-return trip)
b) Punctuality (connecting flights)
c) Airport location and access (convenience)
d) Seat accessibility (book last minute)
e) Frequent flyer benefits
f) Airport service (express check-in)
g) In-flight service

(Doganis, 2006)
Issues
a) Price conscious attitude
b) Punctuality
c) Safety
d) Longer minimum check-in times
e) No frills (pay food & beverage on board)

(Doganis, 2006)
Airfreight forwarder gathers items from individual
shippers in a large consignment e.g. DHL, FedEx

Differences from business travellers

a) Travel only one way on a route
b) Heterogeneous as packages vary in sizes, weight
c) Handling and stowage conditions for fragile or
perishable items

(Doganis, 2006)
 Trade association for the world’s airlines since 1945

 Membership: 240 airlines (118 countries), 84% of total

air traffic

 Total passengers: 1.8b, 750m are international

 Special report: Following in Australia’s footsteps (IATA,

2013)

(Howell, 1992)
 Uses either a single capital letter or, if two letters are
used, one capital and one lowercase letter to modify it
 It is based on the location within the aircraft
 Classes
First Class (F)
Discounted First Class (A)
Business Class ©
Economy (Y)
Discounted Fares (B, K, M, Q, V, L, or H)

(Howell, 1992)
 Need to know when the flight operates

No number – daily flights

7 – flight on Sunday only

6,7 – weekend flights only

X7 – operates everyday except Sunday

(Howell, 1992)
 1949 - Government introduced the ‘two airline policy’
i.e. two airlines operate trunk routes between major
cities, identical equipment and offer identical fares

 1980s – Allowed competition in the air service

markets

 May 1983 – 10 South Australian-based operators

scheduled services within the state

 Monopoly could result inefficiencies in the market

(Starkie, 2008)
 Boost fleet expenditure to rebuild yields

http://centreforaviation.com/analysis/qantas-to-boost-fleet-expenditure-
undertaking-ambitious-savings-programme-hoping-to-rebuild-yields-15540

(Centre for Aviation, CAPA)

 Survival (strong financial position)
 Open skies (deregulation increases competition)
 Nationality rule (airline ownership is multinational)
 Consolidation (mergers and acquisitions)
 Low-cost airlines (Air Asia, Scoot)
 Fares collapse (lower airfare)
 Cutting costs (necessity)
 IT strategy (efficiency)
 Infrastructure (larger airports)
 Environment (air pollution)
(Doganis, 2006)
 Sealy (1992) identifies 2 approaches:
a. a regulated transport system where a country
exercises sovereignty over its airspace;
b. a liberalised and unregulated system characterised by
an open-skies policy
 Deregulation in the USA airline industry in 1978 led to
perfect competition and about 200 carriers were
absorbed or went bankrupt in 1983-88
 Advantages
Lower prices of air travel as prices
dropped by 1.7% between 1978-
1993
Growth in passenger traffic from
275m in 1978 to 769m in 2007
Increased frequency on flights on
trunk routes due to LCCs
Greater competition
Disadvantages
Consumers’ concern on service
standards, delayed flights,
mishandled baggage
Concerns on safety of ageing fleet
of aircrafts
Low operation profits due to
excessive price competition
Failure of US airlines to reinvest in
new fleet for domestic operation
(Page, 2009)
 Full service e.g. Qantas, Cathay Pacific, Singapore Airlines

 Charter airlines – book the aircraft to fly large number of holidaymakers. It is

more economical than flying scheduled airlines

 LCCs – flexibility in service frequency, easily accessed fares and value-for-money

(Barrett, 2004b, Doganis, 2002)

 Full Service Charter airlines LCCs
Free newspaper, Free food/drinks For sale
food, drinks
Seat allocation Seat allocation Free seating
Business class One class operation One class operation
Low seat density High seat density High seat density
Low load factor High load factor High load factor
Hub city airports Resort airports Secondary airports
Day flights Some night flights Day flights
Interlining available Point-to-point Point-to-point
Business lounges
(Barrett, 2004b, at No
Doganis, lounges
2002) No lounges
airports
 Full Service Charter airlines LCCs
Ticket bought near flight Advance purchase Near flight date
date
Ticket sales at own shops Tour operators Internet
Ticket sales at travel No No
agents
Flexible one way tickets No Yes
Unbundled tickets Package holiday Unbundled tickets
Frequent Flyer Programme No No
High frequency service
Nil no show penalty on No show penalty No show penalty
(Barrett,
higher 2004b, Doganis, 2002)
fares
 Emergence of LCCs resulted in lowering airfares and increases
number of seats available
 Passenger numbers from UK to EU (UK Civil Aviation Authority
(2006a)

1996 2005 % increase

Full service 42.2m 47.2m 11.8

airlines
Charter 23.8m 25m 5
passenger
LCCs 3.1m 51.5m 166
(Barrett, 2008)
 A regulatory system based on exclusion of new
entrants, non-price competition, and capacity sharing
between monopolistic national airlines is disappearing

 Now we have a competitive market with significant

benefits to the wider economy in terms of lower
prices, a better range of services in the market, and
large increases in productivity in the aviation sector
e.g. easyJet, Ryanair
(Barrett, 2008)
1. Fly at off-peak times from/to less congested airports (lower
landing charges, quicker turnaround times)

2. Fly point-to-point, short routes (higher crew utilisation and

lower crew costs)

3. Provide a basic service (no in-flight catering, sell snacks)

4. Higher seat density with lesser leg room onboard and more
seats available (higher load factor or more pax)
(Harvey, 2007)
5. Minimum staff (Ryanair carried 15m pax using 2000 staff
versus BA carried 35m pax and 55,000 staff in 2002)

6. Use Boeing 737 as it is cheap and simple (Southwest Airlines

used 737 last 30 years)

7. Cost savings as it operate independently of travel agents,

selling directly over phone or via internet

(Harvey, 2007)
 SIA is a premier tourist transport operator. The subsidiary and
associated companies of the SIA group highlight the
involvement in the tourist transport system:
a. tour wholesaling (package holidays)-Tradewinds
b. air transport (SilkAir, Tiger Airways, Scoot.com, 49% stake in
Virgin Atlantic, 25% in Great Wall airline)
c. airport services (catering, airport ownership, security services)
d. duty-free sales (76% stake in Airport Duty Free)
e. hotel ownership(20% stake in Ritz-Carlton, Singapore)
f. airport bus services
g. aircraft leasing
h. CRS (Abacus Travel Systems)
i. airline software development
j. aircraft engineering and maintenance
k. Hotel and property ownership (SIA Properties)
l. Quality service training
m. Singapore Flying College
n. cargo
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