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In recent years, US airlines have unbundled ancillary fees from base air fares. As a result, the carriers have implemented a variety of fees on a range of optional services. Among these, checked baggage fees now represent a significant source of airline revenues. This paper assesses the impact of baggage fees on passenger demand and airline fares. We study a sample of US domestic routes over the period 2007–2010 where passengers have a choice between carriers that charge fees for checked baggage and Southwest Airlines, which allows passengers one or two “free” checked bags. A system of simultaneous equations is estimated. Our results show that, on an average route, a $1 increase in baggage fee leads to a loss of 0.7 passengers and is associated with a $0.11 reduction in fare levels. Interestingly, an equivalent increase of $1 in fares results in a much greater decline in passengers (eight times greater). Therefore, our results support the idea that substituting additional baggage fees for higher fares may be a beneficial strategy for carriers in terms of generating revenues and maintaining market share. [ABSTRACT FROM AUTHOR]

Gulf carriers, such as Emirates Airline, Etihad Airways, and Qatar Airways, have expanded aggressively and are creating an increasingly dense global network. These carriers’ future growth prospects, however, hinge on their ability to gain access to markets in Europe and America, for example. Existing bilateral agreements stifle the Gulf carriers’ ambitious expansion plans in some instances, and incumbent carriers lobby to restrict further market access. To contribute to this debate, the objective of this research is to empirically examine the effects of Gulf carrier competition on U.S. carriers’ passenger volumes and fares in international route markets. Based on data obtained from the U.S. Department of Transportation, the empirical results suggest that greater competition by Gulf carriers in U.S. international markets is associated with (1) significant growth in U.S.–Middle East traffic volumes and (2) small but statistically significant traffic losses and fare reductions for U.S. carriers in route markets connecting the U.S. with Africa, Asia, Australia and Europe. [ABSTRACT FROM AUTHOR]

In this article, we investigate supply chain-related drivers that contribute to organizational flexibility (i.e., the ability of top management to be responsive to a firm's internal and external needs). Organizational flexibility occurs when a firm outsources manufacturing and operates with a more flexible structure. Drawing upon the supply network perspective, this study develops hypotheses relating attributes of the supplier, customer, and focal industries to the use of a flexible organizational strategy. Using an industry-level data set to test the hypotheses, we show that heterogeneity of supply sources and scale economies (in the focal and downstream industries) are positively associated with a greater degree of organizational flexibility, in terms of contract manufacturing in the focal industry. However, industry concentration levels in the focal and downstream industries are negatively associated with organizational flexibility. [ABSTRACT FROM AUTHOR]

Using a unique, item-level data set, we examined benefits to downstream firms (distributors) from the decision-transfer component of vendor-managed inventory (VMI), the feature that distinguishes VMI from other information-sharing, collaborative supply chain programs. Our major findings are that the decision-transfer component of VMI adds significant benefits to the downstream firm in terms of inventory and stockout reductions above and beyond information sharing, and that these two benefits may be realized at different times following VMI implementation; that is, inventory reduction, initially, may be the major benefit to distributors from VMI, while the benefits of stockout reduction may more likely be realized after the first year of implementation. In addition, VMI provides benefits to the upstream firm (manufacturer) by reducing the downstream firm's inventory variability, a likely contributor to the bullwhip effect. Based on our empirical analysis, the decision-transfer component of VMI, on average, reduces inventory levels by 7%, stockouts by 31%, and inventory variability by 9%. [ABSTRACT FROM AUTHOR]

Highlights: [•] We study efficiency of 44 US airports including delays, noise and local pollution. [•] We perform a directional distance function and a second-stage analysis. [•] With no bad outputs greater aircraft size leads to higher technical efficiency. [•] The larger the dimensions of the airport the higher the technical efficiency. [•] Results are sensitive to the inclusion of the undesirable outputs. [Copyright &y& Elsevier]

While fuel costs have become an important factor in supply chain management, the impact of fuel costs on inventory levels and the distribution of inventories remains unclear. Location theory suggests that fi rms will relocate inventories to regions with lower fuel costs, leading to lower inventories in the states with higher fuel costs. In contrast, inventory theory suggests that fi rms will ship orders in greater quantity with less frequency when fuel costs are high, thus resulting in higher inventories in states with higher fuel costs. Using state-level cross-sectional, time-series data for manufacturing industries in the United States during 1994-2006, we empirically examine how fuel price disparities impact the location and dispersion of inventories. Our major fi ndings are that: (1) states with higher fuel costs have lower inventories ceteris paribus ; (2) there are lower inventory deviations across states when fuel costs rise; that is, the inventory distribution becomes fl atter; and (3) when fuel costs increase, states with higher production output increase their inventories, while states with higher expenditures (as indicated by higher GDPs) experience relative decreases in inventories, suggesting that inventories are relocated from points of demand to points of production. We further quantify that a 1 percent increase in the gasoline price for a state results in a 0.40 percent reduction in inventory levels in the state. Public policy and managerial implications are discussed. [ABSTRACT FROM AUTHOR]

Canadian facilitating bilaterals seem to expand Canadian international air markets. However, due to differences between Canadian international and US international air choices, a contrasting point exists in terms of the effect of liberalized agreements on traffic flows. One study found that partially liberalized agreements have no influence on passenger flows on US international air routes. The Canadian facilitating agreements are not entirely liberalized, because they retain pricing limitations.

Abstract: An investigation is conducted of the contribution of low-cost carriers (LCCs) to traffic diversion from Canadian airports to nearby US airports. An estimated five million Canadian passengers divert to US airports each year. We find that LCCs contribute significantly to the diversion of traffic to US airports. Routes to/from US border airports have a 27 percentage points higher traffic account when an LCC operates on the route, compared to equivalent routes without an LCC presence. Canadian policymakers need to seek ways to attract LCCs to transborder routes to stem this costly traffic diversion. [Copyright &y& Elsevier]

Realizing potential benefits from emerging market penetration requires firms to address inherent supply chain challenges. A major challenge is for firms to manage costly inventories to address demand and supply risks in emerging markets. However, emerging market penetration may offer opportunities for firms to lower inventory levels, reduce costs, and improve operating performance. Using data for 482 manufacturing firms over the 5-year period, 2003-2007, obtained from the COMPUSTAT Industrial and Segment Databases, this article examines the relationships between emerging market penetration, inventory supply, and financial performance. Our results show that a multinational firm's sales penetration into emerging markets is associated with fewer days of inventory supply and improved financial performance. As emerging market penetration may allow firms to operate with lower inventory supply, the positive effect from emerging market penetration, such as labor cost reductions, may be enhanced due to inventory cost savings. [ABSTRACT FROM AUTHOR]

ABSTRACT Despite extensive literature on the value of supply chain collaboration programs, little research has examined the issue from the perspective of organizational learning. Using a unique, operational level dataset, we empirically examine the learning curves through which performance improvements are realized under vendor managed inventory (VMI). Performance is measured at the downstream distributor locations by examining inventory levels after controlling for customer service performance (stockouts). We identify and assess three sources of learning: a supply chain dyad's self-learning, learning spillovers from electronic data interchange (EDI), and learning spillovers from other supply chain dyads. We find that self-learning, learning spillovers from EDI, and learning spillovers from other supply chain dyads, all have positive and significant impacts on a distributor's inventory performance. In addition, we find that self-learning may exhibit a U-shaped learning curve (i.e., performance first improves and then plateaus or declines). These findings suggest that the various learning experiences with VMI and EDI can lead to improved performance over time, but the path to improvement may be complex. [ABSTRACT FROM AUTHOR]