The role of turboprops in China’s growing aviation system

Journal of Transport Geography xxx (2014) xxx–xxx

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Journal of Transport Geography journal homepage: www.elsevier.com/locate/jtrangeo

The role of turboprops in China’s growing aviation system q Megan S. Ryerson a,b,⇑, Xin Ge a a b

Department of City and Regional Planning, University of Pennsylvania, 127 Meyerson Hall, 210 S. 34th Street, Philadelphia, PA 19104, United States Department of Electrical and Systems Engineering, University of Pennsylvania, 200 South 33rd Street, 203 Moore Building, Philadelphia, PA 19104, United States

a r t i c l e

i n f o

a b s t r a c t

Keywords: China Aviation Turboprops Fuel consumption Short-haul aviation

The Chinese aviation system is in a period of rapid growth, with significant growth in second tier and emerging cities. Lower density cities could be well served by regional aircraft, either regional jets or turboprops, which offer different qualities and a different future for Chinese aviation. Turboprops offer a high level of fuel efficiency compared with regional jets which may improve the cost economics for carriers and reduce the air quality and climate impacts of a growing aviation system in a region where air quality and greenhouse gas emissions are a serious concern. However, regional jets are known for their superior quality of service and faster travel speeds. We begin with a spatial analysis of existing Chinese short-haul aviation networks and find that turboprops are deployed in limited number and are dispersed throughout the country. Their limited use, however, is not because of their cost economics. For the existing regional jet network we estimate the trade space of fuel and time for the replacement of regional jets with turboprops and find that all regional jet routes in China would generate savings if replaced with turboprops. We next establish future short-haul aviation routes between new and emerging airports and estimate the likelihood that a turboprop will be used. The finding that the most viable turboprop markets are spatially dispersed through the country validates considering turboprop investment at the state-level as a component of the established Chinese aviation sustainability initiative.  2014 Elsevier Ltd. All rights reserved.

1. Introduction

of improving the competitiveness and efficiency of domestic and international aviation. The aviation expansion into China’s low-density areas follows years of reform in the Chinese Aviation System (CAS). In 2002, the state liberalized the CAS, a liberalization that was notably different compared with the free-market liberalization in the United States. Shaw et al. (2009) notes that the Chinese liberalization led to airline consolidation leading to three major carriers serving three major (northeastern) hubs, and a protectionist strategy to reduce route overlap for the three major carriers. The goal of the three carriers – to be competitive internationally or to serve the large domestic population – remains, however, a debate (Lei and O’Connell, 2011). Lin (2012) finds that that the state focus on major national hubs and alliance partners for international travel leads to an underdeveloped system of regional and subregional hubs to support regional traffic. While the three major airlines focus on boosting domestic coverage, many areas with insufficient air service remain. Shaw et al. (2009) discusses how regional commuter airlines could fill this gap by partnering with China’s major carriers and serving the second-tier and emerging hubs that are not protected. This follows the practice of regional commuter carriers and major airlines partnering to serve lowdensity markets in the US.

The Chinese aviation system is in a period of rapid growth. In the 30 year period from 1980 to 2009, China’s civil aviation system grew at a rate of 17.6% per year, with the number of airports growing from 77 to 166 and annual traffic volume increasing from 3.43 million to 230 million (Lin, 2012). The Civil Aviation Administration of China (CAAC), the aviation authority in the Ministry for Transport, maintains a target of 244 airports across the country by 2020 with the goal of expanding aviation coverage in their National Aviation Network Plan (CAAC, 2007). The CAAC aims to enlarge the aviation network such that 80% of urban and suburban areas are within a 100 km (62 miles) of aviation service by 2020. As the eastern region of China is well covered with airports and aviation service, much of this growth will be in second tier and emerging western and southern cities. In growing the aviation services in these regions, the CAAC is looking to strengthen hub-and-spoke networks across the country to meet the dual goals

q This article belongs to the Special Issue on The Changing Landscapes of Transport and Logistics in China. ⇑ Corresponding author. E-mail address: [email protected] (M.S. Ryerson).

http://dx.doi.org/10.1016/j.jtrangeo.2014.03.009 0966-6923/ 2014 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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Wang and Jin (2007) note that the physical and socioeconomic traits of the more remote emerging airport regions include challenging terrains along with high poverty and percentages of minority populations. These regions are uniquely positioned for service by regional commuter airlines utilizing short-haul aircraft, either turboprops or regional jets. These aircraft are smaller than traditional narrow body jet aircraft which are widely used in China today (Shaw et al., 2009), offer lower ownership costs and operating costs per operation, and, because they necessitate shorter runways, are able to service some smaller and less developed airports. While aircraft in both of the short-haul aircraft categories share similarities, the adoption of short-haul aircraft in CAS expansion will have vast impacts on the economic and environmental impact of aviation. Firstly, turboprops necessitate shorter runways (1400 m compared with 2000 m for jets), offering the possibility of serving more challenging terrains; as a result, turboprops offer enhanced expansion opportunities. Secondly, turboprops are significantly more fuel efficient compared with regional jets; however, this fuel efficiency comes at the cost of passenger level of service (Ryerson and Hansen, 2010). Turboprops have a slower travel speed, and, in addition, are perceived as less comfortable compared with jets. In fact, Adler et al. (2005) find that the disutility of passenger travel on a turboprop can be up to $40/ passenger-trip. In addition, turboprops have a shorter range of travel (900–1300 miles) compared with regional jets (1400–2000 miles) and have smaller cargo holds, limiting their versatility to serve a network. Turboprops offer significant benefits at a cost, namely a cost to passengers in the form of reduced service quality and to airlines in the form of reduced flexibility. In the 1980s and 1990s, the relatively loud, uncomfortable turboprop with a limited operational range fell out of favor with the introduction of regional jets (Johnston, 1995; Mozdzanowska and Hansman, 2004). Recent improvements to passenger level of service and operating range, coupled with fuel price increases are leading a surge of interest in new turboprop models. New turboprops are currently in service for North American carriers such as Alaska Airlines/Horizon Air, Canada’s Porter Airlines, along with other carriers worldwide. In 2008, turboprops were 4% of the domestic seat capacity provided by US carriers. While this is a small percent, it is very robust; in fact, turboprops saw a reduction in total seat capacity offered in 2008 of 6% compared with 2007, a minimal decline compared with the 11% seat capacity reduction from 2007 to 2008 seen by narrow body aircraft. Because turboprops consume fuel at a relatively low rate, the Government Accountability Office (GAO, 2009) concludes that the market for turboprops is small but stable compared with other jet aircraft, a finding empirically confirmed by Ryerson and Hansen (2010). Aircraft manufacturer plans also signal a renewed interest in turboprops. As of 2013, five aircraft manufacturers in as many different countries – China, India, Korea, Canada, and Italy – maintain serious plans to develop and market 90-seat turboprops; such a move will boost turboprop seat capacity and also increase the competitiveness of turboprops with regional jets (Perrett, 2013). Also signaling a growing market for turboprops is the increased competition in the engine market, with General Electric designing a turboprop engine to contend with the established Pratt & Whitney model (Morris, 2013). While turboprops may be close to shedding their perception as aircraft with low quality of service and flexibility, their perception as unsafe aircraft lingers, particularly in China. Two crashes of the Xian MA-60 turboprop, the model favored in China and manufactured by Chinese manufacturer Xi’an Aircraft Industrial Corporation, occurred on the same day in the summer of 2013. In the immediate aftermath, the civil aviation authorities of Indonesia and Myanmar grounded their fleets of the MA-60 (Dennis, 2013). There are instances of turboprop crashes worldwide, including a

crash in Buffalo, New York in 2009. Turboprops are not necessarily unsafe aircraft, however, they are generally operated by inexperienced crew and pilot error is a frequency cause for such crashes (Ryerson and Hansen, 2010). Turboprops present challenges compared with regional jets: institutional challenges such that the operating crew are welltrained, and passenger preference challenges because of their perceived discomfort. However, the significantly lower cost of operation reduces the break-even point for which such services are cost effective. This lower cost allows airlines to serve more destinations and complete their hub networks, increasing their market dominance and allowing them to charge higher fares (Morrison and Winston, 1990). Much of this savings comes in the form of reduced fuel costs. In addition to financial health, turboprops present an opportunity for the CAS because of their potential to reduce aviation fuel consumption, a major initiative of both public and private entities worldwide. The consumption of fuel has significant economic and environmental implications. The cost of fuel plays a large role in the economic health of the airline industry worldwide. Because of the skyrocketing cost of fuel, in 2012 fuel was 33% of operating cost for US-based carriers compared with 9% in 2004 (BTS, 2013). This percentage is likely larger in China, as fuel costs are greater in China compared with the US. Fig. 1 shows US and Chinese jet fuel prices (IndexMundi, 2013; National Development and Reform Commission, 2013). Currently, Chinese jet fuel prices are set by the National Development and Reform Commission. While both follow the same trend, Chinese prices are higher, making fuel consumption an even greater cost concern for airlines in China. There is significant uncertainty, however, regarding fuel prices going forward. Ma and Oxley (2010) address tentative moves by the Chinese government towards energy market deregulation, which may bring down energy prices. Deregulation faces significant barriers and challenges, however, surrounding the future of energy regulation and resulting prices in China with uncertainty (Ma et al., 2009). Despite the uncertainty, Ma et al. (2009) emphasize the need for energy pricing reform in China, particularly in the response of prices to demand, because of the need to manage transportation system congestion and environmental emissions. The consumption of fuel leads to environmental externalities in the form of local and global pollutants, both of which have reached large levels in China. Regarding global Greenhouse Gas (GHG) emissions, China surpassed the US in 2007 and ranked first on the Carbon Dioxide (CO2) emissions country list. Emissions of CO2 have not slowed, as CO2 emissions in China grew from 6.8 billion metric tons in 2007 to 8.3 billion metric tons in 2010, accounting for 26.4% of global 2010 CO2 emissions (United Nations Statistics Division, 2013). Emissions from aircraft are particularly significant, as GHG emissions at altitude can be particularly harmful in terms of an increased warming effect (Williams et al., 2002). Aircraft also emit local pollutants such as CO, NOx, and PM during their ground taxi procedures, which have a strong impact on human health (Chester and Horvath, 2009). Local pollutants are a significant concern in China, as many major Chinese cities suffer from PM2.5 concentration much higher above World Health Organization standards (Tan, 2013). The small particles generated from burning fossil fuels contribute to significant number of fatal respiratory diseases and premature deaths (Winter, 2013). While the aviation industry continually seeks improvements in fuel efficiency, this share is expected to increase as other transport modes shift away from carbon-based fuels. Such an action will further increase the pressure on the aviation sector to reduce GHG emissions (Yang et al., 2009). Additionally, aviation in the European Union is now included in emissions trading, effectively increasing the cost of fuel; as environmental concern intensifies, so does the threat of fuel price increases from a mix of market forces and environmental charges (Scheelhaase et al., 2010).

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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Fig. 1. Fuel prices in China and the US. Source: IndexMundi Data and National Development and Reform Commission Data.

The severity of environmental issues in aviation prompted action from the Chinese government and the aviation industry. The CAAC identified reducing emissions as the major environmental goal for the aviation industry in their Twelfth Five-Year Plan covering the years 2011–2015. The CAAC requires that airlines utilize energy efficient technologies to reduce fuel consumption in every stage. The recommended technologies include winglets on aircraft, upgraded aircraft engines, and replacing Auxiliary Power Units (APUs), which run on fuel, with ground devices that run on electricity (CAAC, 2011). CAAC also requires airports to be constructed and operated with new materials and renewable energy to mitigate environmental pollution. To help airlines and airports adopt CAAC-recommended technologies, the CAAC document titled ‘‘CAAC Energy Conservation and Emission Reduction Funding Program Guidelines’’ (CAAC, 2013) outlines environmental initiatives supported by a CAAC funding program. In 2012, 254 projects received 300 million yuan (approximately 49 million US dollars assuming a conversion factor of 6.12 yuan/1 USD) to support their projects (Wang, 2013). These projects will lead to reductions in fuel consumption and environmental emissions, yet the gains are expected to be modest compared with changes in aircraft types, confirmed empirically by Ryerson and Hansen (2013). In addition, Ryerson et al. (2012) find that the benefit pool for surface emissions can be overestimated because airlines have already streamlined their surface operation, resulting in surface-based initiatives with smaller potentials than expected. The focus on environmental pollutants brings fuel savings to the forefront of future CAS planning. However, despite the significant potential of turboprops to reduce fuel consumption and to manage fuel cost fluctuations, the use of turboprops for short-haul aviation travel is not included in the CAAC guidelines nor is investment in low-emission aircraft supported by the CAAC funding. Towards informing guidelines on aircraft investments in addition to modifying operations, we seek to understand the potential role of turboprops in the CAS in the present aviation network and in the future planned aviation network. We are interested in the spatial distribution of networks best served by turboprops as well as the potential benefit of turboprops, towards providing guidelines for including turboprops in a state-based energy conservation plan. To do so, we collect information on existing and future short-haul air travel in China. We investigate statistics and spatial patterns to understand Chinese short-haul, lower density aviation today. The spatial analysis and supporting empirical models are used to estimate the gains and losses from transitioning the existing regional jet fleet with a fleet of turboprops. Finally, we build a statistical model to predict where turboprops could and will be

used in an expanded aviation market, towards understanding their spatial distribution in the future CAS. 2. Data collection To support our analysis, we collect Chinese airport data and scheduled flight data as well as travel time and fuel consumption data related to regional jets and turboprops. 2.1. OpenFlights airport database 2012 We collect latitudes and longitudes for 181 Chinese airports from OpenFlights (2012), an open source resource for airport locational data. The data includes airport names, city names, country names, International Air Transport Association (IATA)/Federal Aviation Administration (FAA) codes, and latitudes and longitudes for all the airports. 2.2. Scheduled flight data All intra-China scheduled arrival and departure operations for July 18, 2013 (the third Thursday of the month, a common aviation planning day) are collected from masFlight, an aviation data company. This dataset includes, among a host of variables, origin, destination, aircraft type, number of seats per operation, and market carrier for each flight. 2.3. Aircraft travel time Towards estimating travel time, we use the average cruise speed of turboprops (320 mile/h) and regional jets (530 mile/h) found empirically in the scheduled flight data. Throughout the analysis we will be most interested in the relative travel times rather than the absolute travel times; for this reason, we use the average cruise speeds and not traditional models of block time. This also avoids any distortions to block time because of airport congestion or airline practices. 2.4. Fuel consumption data and model To capture fuel consumption for the different aircraft types, we utilize two fuel consumption models estimated by Ryerson (2010). The fuel consumption models are a function of the two variables which are the key drivers of fuel consumption (F), distance and seats. The estimated models for turboprops and jets are shown in

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(1), with all coefficients significant at the 1% level. The data utilized in the model is based on US fuel consumption from the Bureau of Transportation Statistics, due to data availability. While the model formulation is simple, Ryerson and Hansen (2013) find that models of aviation cost can be well captured by simple models that assume a Leontief production process (the inputs are entered in fixed proportions) compared with more complex models allowing for input interaction. As fuel is a large component of operating cost, we generalize this result to the fuel consumption models.

F tp ¼ 0:495  distance þ 2:030  seats F rj ¼ 2:392  distance þ 3:488  seats

ð1Þ

It is clear from the relative values of the coefficients in (1) that turboprops burn less fuel per seat and per mile compared with jet aircraft.

3. Turboprops and the current CAS network In this section we explore the role of turboprops in the current Chinese aviation network. We begin by exploring the short-haul Chinese air transportation network. 3.1. Spatial trends for short-haul aviation We begin by exploring the flows of regional jets and turboprops based on our scheduled flight data. We create geodetic two-point line features from an array of start and end points to visualize the flight routes (matching the OpenFlights airport dataset with the scheduled flight data) between origins and destinations in ArcMap 10. The resulting flowlines are color-coded1 according to the two aircraft types. We begin with Fig. 2 which includes all 655 flights on regional jets and 70 on turboprops. This map shows the dominance of regional jets over turboprops in the Chinese short haul aviation market. Regional jets knit eastern China together, connecting smaller cities with hubs and providing direct service between secondary cities. They are particularly prevalent in Western China. The top five regional jet hubs with the largest number of feeder routes are Urumqi (Northwestern China), Xi’an (Central China), Hohhot (North Central China), Tianjin (Northeast China), and Guangzhou (Southeast China). Overall, there are seven airlines operating 655 flights on regional jets including two of the major Chinese carriers, China Southern Airlines (CZ) and China Eastern Airlines (MU), along with the regional carriers Shandong Airlines (SC), Tianjin Airlines (GS), Shanghai Airlines (FM), China Express Airlines (G5) and Northeast Airlines (NS). Compared with regional jet service, turboprops exhibit more spatial concentration and a narrow range of distances. Turboprops are concentrated in Northeast China, as well as the intersection of North China, Northwest China, and South Central China. The turboprop flights in Northeast China are operated by Okay Airways. The main hub of Okay Airways is Tianjin Binhai International Airport in North China. Okay Airways does not operate turboprops from the hub, but rather operates turboprops in Northeast China from Harbin with seven feeder routes into nearby second-tier cities. The operator of turboprop flights in Central China is Joy Air, a subsidiary of China Eastern Airlines. The turboprop network in central China consists of several hubs with a few feeder routes. The current turboprop hubs include Xi’an (five feeder routes), Taiyuan (four feeder routes), and Zhengzhou (four feeder routes). The three hubs are also inter-connected by turboprops. While there are multiple 1 For interpretation of color in Figs. 2 and 5, the reader is referred to the web version of this article.

operators of turboprops, all the turboprops in China are Xian MA-60 manufactured by Xi’an Aircraft Industrial Corporation. Fig. 2 illustrates that turboprop flights serve a narrow range of very short-haul flights while regional jets serve both very short haul flights and longer haul flights (such as between Western and Central China). To explore the difference in catchment areas of the aircraft types in the current Chinese network, we identity the key hubs of turboprops and regional jets and calculate the 75th and maximum distance flight from that hub. Table 1 includes results for both turboprops and regional jets; because of the large number of regional jet routes, the top five hubs based on the number of feeder routes are displayed. The ranges of turboprops routes are significantly less those of regional jets. Generalizing the 75th percentile and the maximum distance turboprop flights from each turboprop hub into catchment areas (Fig. 3), we see that much of Northeastern and Eastern China falls in the catchment area of the turboprop hubs. 3.2. Regional jet and turboprop trade space in the existing CAS Fig. 3 indicates turboprops could be more widely deployed. Towards exploring their potential, we estimate the benefits and costs of the system if regional jet routes were replaced with turboprops. 3.2.1. Distance-based aircraft replacement We begin by spatially depicting regional jet routes that could be replaced by turboprops. Fig. 4 shows the regional jet routes that would be replaced if we limited the replacement to flights of a distance less than the 25th percentile of regional jet flight distances across the network ((a) 266 miles); the 50th percentile ((b) 402); the 75th percentile ((c) 576); and all flights ((d) 1308 miles). The small gap between the 50th and 75th percentile of regional jet flight distances indicates that there are many flights in the under 600-mile category for regional jets. The 75th percentile of flight distances for regional jets, 600 miles, is well within the technical range of the MA-60 turboprop, but the maximum distance regional jet route is not. We see from Fig. 4a that if our strategy is to place turboprops on the shortest regional jet flight routes first, the flights will be spatially distributed across the country. Within this spatial distribution we see many hubs emerge with connections less than 266 miles, particularly in the Northwest, the Southeast, and the Northeast. As we increase the distance threshold for replacement, we see these hubs increase in intensity as far as the number of connections to be served by turboprops. This indicates that the deployment of turboprops might be well suited to be a state-led strategy targeted at airlines, allowing them to redefine their hub connections with lower emissions turboprops. 3.2.2. Fuel and time trade-offs Certainly, replacing regional jet operations with turboprops would come at a cost: flight times would increase (increasing the cost faced by passengers) while fuel consumed by each flight would decrease. To estimate this trade-off we monetize time and fuel to explore the distance-fuel price trade space between regional jets and turboprops. The monetization of fuel is straightforward, as fuel price is published and shown in Fig. 1. The monetization of time requires a Value of Time (VoT) metric. VoT in transportation is typically estimated through discrete choice models that capture how a decision maker trades time, cost, and other attributes. VoT is then the marginal rate of substitution between the time and cost inputs. Estimates of VoT exist in the US-based air traveler literature. Using a combination of revealed and stated preference surveys for air transportation users, Adler et al. (2005) use a mixed logit model to estimate the value of flying time, schedule delay, and

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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Fig. 2. Regional flight connections in China. Source: masFlight.

Table 1 Statistics of turboprop and regional jet flight connections in China. Source: masFlight Data. Hub

Airport code

Turboprops Harbin Xi’an Taiyuan Zhengzhou Dalian Hefei

HRB XIY TYN CGO DLC HFE

Regional jets Urumqi Xi’an Hohhot Tianjin Guangzhou

URC XIY HET TSN CAN

Number of feeder routes

Radius 75th percentile (miles)

Radius maximum (miles)

Region

7 5 4 4 3 3

282 312 276.5 275 127 275

342 313 313 289 192 275

Northeast China Northwest China North China South Central China Northeast China East China

56 32 29 28 22

408 690.5 564 574 709

1308 1308 1255 1386 1112

Northwest China Northwest China North China North China Southern Central China

on-time performance assuming all non-fixed parameters are normally distributed. Adler finds that the value of time for in-vehicle time for a business traveler is $69.70/h and for a leisure traveler it is $31.20/h. Ball et al. (2010) use a value of time of $37.6/h for a study of US aviation delay for the Federal Aviation Administration. There is less understanding of VoT in developing countries. In presenting a methodology to estimate VoT for developing countries, Walker et al. (2010), in a case study of commute mode in Chengdu, China, notes the dearth of estimates of VoT for Chinese travel. The authors estimate the VoT for local commute travel to be 12 yuan/h (which is about 80% of the average income rate, and about $2.00). In a study using survey data from transportation users in Shanghai in 2001, Liu (2006) finds the value of ‘‘In-vehicle time’’ and ‘‘Out-of-vehicle time’’ to be 15.1 yuan/h and 20.2 yuan/

h, respectively (with the mean wage across the sample at 21.7 yuan/h). These values are consistent across the two studies, however, the sample population is of local travelers and not air travelers, who are likely to have higher values of time. Towards gaining more insight into Chinese VoTs, we explore spatial and temporal trends in the wage rate. In 2011, the per capita personal income in China was $3560, and Shanghai had the maximum average income for a province at $6622.90 (National Bureau of Statistics of China, 2013). Comparatively the average income in the US was $41,560 in 2011 (University of New Mexico, 2013). If the US VoT for air travelers is $37.60/h, we can estimate that a commensurate VoT for China based on the wage rate is $3.22/h on average and $6.00/h for the maximum income province of Shanghai. There is, however, a significant wage gap in China as

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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Fig. 3. Turboprop flight connections in China and catchment areas. Source: masFlight.

well as rapid income growth. While personal income in the US increased 32% from 2002 to 2011, per capita personal discretionary income in China increased 183% during the same time period. From 2002 to 2011, the standard deviation of per capita annual discretionary income by province in China also increased from $328.94 to $876.27, reflecting an expanding income disparity between regions in China. In 2011, the highest average annual discretionary income by province was $5920 in Shanghai on the east coast, and the lowest was $2449.1 in Gansu in the west inland, highlighting the spatial differences in economic conditions. In short, establishing a VoT that is both credible and inclusive is a challenge, particularly in China. For this reason, we design a metric titled the break-even VoT. This is the VoT for which the fuel savings and increased travel time incurred if a turboprop is used in place of a regional jet are equal. The break-even VoT indicates the maximum VoT for which turboprops are still an economically viable option. In short, if VoT for Chinese travelers is greater than the calculated metric, regional jet operations should not be redaq , is formulated placed with turboprops. The metric, termed VoT as a function of the fuel consumption and travel time of a flight.

P

crj c tq i að F i  F i ÞIi ðqÞ daq ¼ VoT P d drj tq i ð TT i  TT i ÞI i ðqÞ

ð2Þ

ck F i is the estimated fuel consumed in gallons for flight i on aircraft k (turboprop, regional jet 3 k) using the equations estimated in (1) d and the scheduled flight data. TT ki is the estimated travel time for flight i on aircraft k estimated using the average cruise speed for aircraft type k and the travel distance for flight i in the scheduled flight

data. a is the price of fuel in $/gallon, to be considered parametrically from $3.00/gallon to $5.00/gallon, consistent with recent historical Chinese jet fuel prices. Ii(p) is an indicator function equal to 1 if the distance of flight i is less than the p-percentile distance across all flights. The aircraft replacement algorithm is done in two ways. First, c we do a seat by seat replacement such that we estimate F ki 8 k as a function of the number of seats for flight i (the number of seats per flight is reported in the scheduled data). By assuming aircraft size is continuous we allow for the notion of direct aircraft size replacement. Second, we assume all turboprops have 50 seats, and, if flight i is on a regional jet with more than 50 seats, we replace it with two turboprops. This is a conservative estimate that provides an upper bound (or, a lower bound break-even VoT) for analysis. daq presented in Table 2 represents the value of The quantity VoT the savings, in $/h-seat, from switching flights of a distance less than the p-th percentile of all flights from regional jets to turboprops at fuel daq > VoT, where VoT price a. A switch to turboprops is justified if VoT is the average value of passenger time for intra-China aviation. When daq > VoT, the savings per passenger from switching to turboprops VoT is more than the value of passenger value of time. Overall, we find that the break-even VoTs are at the upper bound of US VoTs or greater. A switch to turboprops is easily justified for all flight distances covered by regional jets, offering a significant potential to save fuel. We note daq decreases with increasing q, as it is less attractive to switch that VoT daq increases a regional jet with a turboprop over longer distances. VoT with fuel price, as regional jets are less fuel efficient than turboprops.

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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Fig. 4. (a–d) Candidate regional jet routes for replacement.

Table 2 Break-even value of time. Fuel price ($/gal)

Distance percentile 25% 50% 75% 100%

Seat-by-seat replacement ($/h)

Full aircraft replacement ($/h)

3.00

4.00

5.00

3.00

4.00

5.00

77.4 71.4 67.9 64.2

103.2 95.2 90.5 85.6

129.1 119.0 113.1 107.0

66.3 58.2 53.4 48.6

88.4 77.6 71.2 64.8

110.5 97.0 89.0 81.1

4. Future of aviation in China Newly emerging airports and routes provide a unique opportunity to expand the short-haul aviation network. We consider the potential for turboprops to play a role in an expanded network with these newly emerging markets. Utilizing CAAC development plans, we explore the spatial patterns of the future CAS and, using a binary logit model, predict the market share of turboprops on the future routes. 4.1. Emerging hubs and spokes The CAAC plans to expand the number of airports from 175 in 2010 to 244 in 2020 with the goal of locating 80% of urban and

suburban areas within 100 km of aviation service, as detailed in their National Aviation Network Plan for 2020 and a series of FiveYear Plans (CAAC, 2011). This expansion comes with an increase in annual passenger traffic from 268 million to 450 million and an increase in aviation mode share from 14.5% to 16% from 2011 to 2015. This plan specifies focus regions and cities for constructing new airports as well as expanding existing airports and establishing air connections between hubs and spokes. The focus regions and cities are selected based on economic goals such as international or regional economic cooperation, economic revitalization, and tourism development. The Plan also emphasizes new route connections, particularly for Western provinces, where surface transportation is inconvenient due to geographic characteristics. Fig. 5 shows the expected emerging hubs and spokes as discussed in the Twelfth

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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M.S. Ryerson, X. Ge / Journal of Transport Geography xxx (2014) xxx–xxx

Fig. 5. Emerging airport hubs and spokes. Source: masFlight and CAAC.

Five-Year Plan. The current turboprop and regional jet networks are also placed on the map to show existing connections. The CAAC plans to accelerate the growth of major regional airport hubs such as Tianjin, Changsha, and Shenzhen, which are represented with the dark blue dots in Fig. 5 map. Also, CAAC plans to reinforce the role played by secondary hubs such as Changchun, Hohhot, and Lhasa. These airports have a lower demand than the regional hubs yet larger than the spoke airports. Thirdly, several spoke airports such as Daqing, Huai’an, and Kashi are highlighted by CAAC for improvement. Moreover, CAAC is identifying cities without airports and pursing airport construction in these cities. Two examples are Jiuhuashan and Daocheng, two cities with newly constructed airports as of the fall of 2013. These new airports serve as spokes in an airline network and feed nearby hubs. Both the existing spoke airports highlighted by CAAC and the new airports are represented with triangles as emerging spoke airports on the map in Fig. 5. Table 3 documents the focus of the CAAC plan in detail with a focus on expansions that could introduce new short haul travel and highlights the rationale behind the airport developments and expansions (CAAC, 2011). 4.2. Future turboprop network Section 3 established that turboprops could be a viable replacement for regional jets across the entire network when trading fuel costs for time costs. However, we know from the existing network that the use of regional jets is significantly more prevalent than turboprops. In the following section, we estimate the potential for turboprops in the future network, based on the underlying

choice structure of short-haul aircraft among Chinese carriers. To this end, we develop a binary logit model to predict the likelihood of turboprop adoption (or, said another way, the mode share of turboprops) on each future route. The binary logit model allows for the prediction of probabilities from a choice set of two, in our case, k 2 K  (regional jets and turboprops, or rj and tp). In doing so we build on numerous aviation system studies employing discrete choice models to predict airline and air passenger behavior (see, for example, Adler et al., 2005; Wei and Hansen, 2005; Loo, 2008; Hsiao and Hansen, 2011). For each future route, we predict the probability that it is served with aircraft type k as a function of attributes of each aircraft type and attributes of the route. To do so, we build a model to explain aircraft choice on individual routes as a function of aircraft and route characteristics. The characteristics include the time it takes to traverse each route on both aircraft types and the population density of the origin and destination of a route. We utilize the scheduled flight dataset for our study day and estimate the travel time on both possible aircraft types for each flight using the method outlined in Section 2.3. We next determine the urban density of each airport. These density categories include: High (H) for airports serving cities with an urban population greater than 500,000 persons; Medium (M) for airports serving cities with an urban population between 200,000 and 500,000; and Small (S) for those with an urban population of less than 200,000 people. Each route serves two cities, and we define six binary variables representing the density of the origin and destination (without defining the directionality of the flight): LL, MM, LM, LH, MH, and HH.

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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M.S. Ryerson, X. Ge / Journal of Transport Geography xxx (2014) xxx–xxx Table 3 Network developments and expansions planned by CAAC in the Twelfth Five-Year Plan. Source: CAAC. Airport Cluster

Major regional hubs

Secondary hubs

Spoke airports New spoke airports highlighted by CAAC

Related economic goals

Northern China

Harbin, Shenyang, Dalian, Tianjin

Shijiazhuang, Taiyuan, Hohhot, Changchun

Mohe, Daqing, Erenhot

 Northeast Asia economic cooperation (esp. Harbin)  Revitalization of Northeast China industrial region (esp. Shengyang)  Strategic development of Binhai New Area in Tianjin

Eastern China

Shanghai Hongqiao, Hangzhou, Nanjing, Xiamen, Qingdao

Jinan, Fuzhou, Nanchang, Huai’an Hefei

Jiuhuashan (opened in  Trade with Japan and Korea July 2013)  Shandong Peninsula Marine Economic Development Zone  Connection to Taiwan

South Central China

Shenzhen, Wuhan, Zhengzhou, Changsha, Nanning, Haikou

Guilin, Sanya

Hengyang (under construction)

Baise

Fuyuan (under construction)

 Pan-Pearl River Delta Area economic integration  Rise of Central China Plan (esp. Wuhan and Zhengzhou)  Tourism in Sanya and Guilin

Southwest China

Chengdu, Chongqing, Kunming

Lhasa, Guiyang

Tengchong

Daocheng (opened in September 2013)

 ASEAN–China Free Trade Area (ACFTA)  Connection to South Asia and Southeast Asia (esp. Kunming)  Tourism to minority ethnic groups regions

Northwest China

Xi’an, Urumqi

Lanzhou, Yinchuan, Xining

Korla, Kashi, Yushu

The binary logit model (3) predicts the probability that a route is served with aircraft type k. This probability is a function of the utility of the route being served by both aircraft types k. The utility of utilizing aircraft type k on a route, Vk, is a unitless measure of attractiveness or satisfaction. We predict the coefficients on the utility models in (4) such that we can gain insights into how the relative utility of the two aircraft types is affected by route and aircraft characteristics. The logit model predicts the mode share of aircraft type k by taking the ratio of the exponent of deterministic utility of aircraft type k to the sum of the exponents of the deterministic utilities of serving a route with either aircraft type.

eV k PðkÞ ¼ P Vj j2K e V k ¼ btt ttk þ Ik ðrjÞ

ð3Þ X bd Dd

ð4Þ

d

P(k) is the probability that, for a single flight on aircraft k, k 2 K, Vk > Vj "j. Vk is the deterministic utility function for aircraft k. ttk is the travel time on aircraft k. Dd is a binary variable designating the density measure for the route, where d 2 (LL, MM, LM, LH,

Table 4 Binary logit estimation.

*

Parameter

Estimate

t Value

Parameter estimates Travel time Low density/low density Low density/medium density Low density/high density Medium density/medium density Medium density/high density

0.0904*** 2.0615** 0.3327 1.1673** 0.6095 1.0125*

5.46 1.97 0.29 2.07 0.52 1.66

Estimates are significant at the 10% level. Estimates are significant at the 5% level. *** Estimates are significant at the 1% level. **

Shihezi (under construction)

 Trade between China and Central Asia (esp. Urumqi)  Tourism to minority ethnic groups regions

MH). HH is the base case. Ik(rj) is an indicator function which is 1 if the observation is for a regional jet and 0 otherwise. Table 4 contains the estimation results. The coefficient of travel time is negative as expected, and the estimate is significant. The interpretation is that increased travel time decreases the utility of a particularly aircraft type. The density variables enter into the regional jet utility function, with a route serving two high density airports as the base case. The interpretation is that, for example, the utility of using a regional jet for travel between airports in low density regions is less than the utility of using turboprops, when compared with the utility of using regional jets for travel between high density regions. We see that, if travel time were equal, the utility of turboprops is greater than that for regional jets for all density pairings; because travel time between these two modes is never equal, the density fixed effects are picking up the preference for turboprops that is unexplained by the travel time variable. The density pairings with significant coefficient estimates, again, all negative, are LL, LH, and MH, showcasing that turboprops have a higher utility than regional jets when serving at least one region of low density. Using the logit model estimates in Table 4, we predict the probability turboprops will be utilized for potential new routes between new and emerging airports in China. First, we establish potential new routes between spokes and hubs by linking the emerging spokes to emerging hubs which are shown on the map in Fig. 4; these new routes are shown in Table 5. We link spokes to the nearest hubs and also link airports that are grounded in the economic goals of the CAAC. For example, we establish a direct connection between Guilin and Hengyang, the second largest city of Hunan Province, to facilitate tourism development in Guilin which is a stated goal of the CAAC. As another example, Jiuhuashan, home to a new airport opened in July 2013, is linked to the nearby regional hub Wuhan so as to bring new investments and travelers from Wuhan to stimulate economic development in the Anhui Province. Currently there are flights from Jiuhuashan to

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

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M.S. Ryerson, X. Ge / Journal of Transport Geography xxx (2014) xxx–xxx

Table 5 Predicted turboprop mode shares for the future CAS network. Spoke

Hub

Distance (miles)

Probability – Turboprop (%)

Shihezi Daqing Baise Huaian Huaian Shihezi Huaian Baise Hengyang Jiuhuashan Daqing Jiuhuashan Huaian Daocheng Baise Hengyang Hengyang Huaian

Urumqi Harbin Nanning Nanjing Hefei Korla Qingdao Guiyang Guilin Wuhan Changchun Shanghai Jinan Chengdu Kunming Wuhan Shenzhen Zhengzhou

71 88 108 139 174 179 185 194 195 206 210 218 237 249 279 285 302 308

38.2 35.5 32.5 28.0 23 22.9 22.2 21.1 21.0 19.8 19.4 18.6 16.7 15.6 13.1 12.6 11.4 11

Beijing, Shanghai and Chengdu, and the new airport allows growth in short-haul markets. We next estimate the travel time on a turboprop and on a regional jet for these routes based on their orthodromic distance (using the average cruise speeds established in Section 2) and categorize the airports based on their density. The predicted mode shares of turboprops are shown in Table 5, for links with more than a 10% mode share. The result of the prediction is not absolute turboprop adoption vs. non-adoption, but rather a metric like mode share for turboprops. For example, if an airline is to operate five flights per day between Shihezi and Urumqi, it is likely that two of those

flights will be on turboprops. The percentages are all less than 50%, which is expected because the parameters are estimated on realized flight schedule data which includes many more regional jets than turboprops. What we do see is that the percentages are rather high considering the low use of turboprops in China today. As expected, the shorter distance flights have a higher percent mode share of turboprops. To look at the spatial location of these flights we look at Fig. 6, which shows the links based on the turboprop mode share. We see that the spatial distribution of turboprops spans the country, with links emerging in Western, Southern, and Northestern China. Because of their ability to serve shorter distance flights and a wide variety of density pairs, the strategy for turboprop deployment is likely best to be a national strategy instead of an airline-based or hub-based strategy. Fig. 6 also clearly shows that some routes have better potential for turboprop operations, such as the Baise–Nanning connection (probability: 32.5%), Huai’an-Nanjing connection (28.0%), and Shihezi–Korla connection (22.9%). Most of the spoke airports highlighted by CAAC, especially Huai’an and Baise, prove to be desirable candidates for operation of turboprops. Among the highlighted routes in Fig. 6, only two routes (Shanghai–Jiuhuashan, Chengdu–Daocheng) have already established direct flights. Some other routes studied are connected indirectly by two legs, and the rest have no flight connection yet. The existing direct flight from Chengdu to Daocheng is currently operated with Airbus 319 at 6:55 am, and the fare is over 1500 yuan (USD245) for a single trip. The indirect flight connections also charge high fares, such as the ones connecting Baise and Guiyang or Huai’an and Jinan. Overall, the fares are generally higher along these assessed routes because of the adoption of narrow-body jets or even wide-body jets on routes that have lower demand. The incompatibility between chosen aircraft and market demand

Fig. 6. Turboprop connections in the future CAS network.

Please cite this article in press as: Ryerson, M.S., Ge, X. The role of turboprops in China’s growing aviation system. J. Transp. Geogr. (2014), http://dx.doi.org/ 10.1016/j.jtrangeo.2014.03.009

M.S. Ryerson, X. Ge / Journal of Transport Geography xxx (2014) xxx–xxx

compels the airlines to schedule for low frequency or arrange inefficient indirect connections. Adoption of turboprops along these routes will enable the airlines to reduce operating cost and increase frequency of their services to provide flexibility for passengers and induce more demand in these markets. It is unlikely that the narrow-body jets or wide-body jets are utilized because of cargo loads, and it is also unlikely that the assessed routes will carry heavy cargo traffic in the near term. Although Chengdu and Zhengzhou are rising as major freight markets with manufacturing being relocated from the coastal areas to central and western China, most of the goods manufactured in these areas are intended for export rather than domestic consumption (CAPA, 2013). Also, since most assessed routes are short- and medium-distance connections which are more time-definite compared to long-distance connections, freight markets along these routes are already dominated by surface transportation because of the lower costs. In the next five years, apart from large-scale expansion and addition of airports, China also has plans to construct more than 40,000 km of express rail lines and more than 85,000 km of highway to complete the surface transport network. Such efforts would further divert air cargo traffic in these markets to ground transport modes, as predicted in the ‘‘World Air Cargo Forecast’’ (Boeing, 2012). Therefore, it is foreseeable that air traffic along these assessed routes would largely cater towards passenger services. Among the routes that have solid potential for turboprop operations, the routes to Jiuhuashan, Guilin, Kunming, and Daocheng are likely to serve a larger share of leisure travelers than average because all the four cities are supported by robust tourism industry. Routes to Shenzhen, Wuhan, and Qingdao would have a larger portion of business travelers on board than average because these cities are regional economic and trade centers. Since business and leisure passengers value time differently, it is foreseeable that the business travelers with relatively larger VoT compared with the break-even VoT would choose services provided by other types of aircraft along these routes, while leisure travelers and business travelers with lower VoT would use turboprop services. Harnessing the heterogeneity across passengers consumes fewer resources while still providing passenger service. 5. Conclusion In this study we focus on a segment of the Chinese aviation system that is on the precipice of expansion: the short-haul aviation system. Our study motivates the inclusion of turboprops in the state-led initiatives to support aviation sustainability. In defining new metrics for analysis, such as the break-even VoT, and in exploring the spatial patterns of the current and future short-haul CAS, we find a large role for turboprops in the CAS. More specifically, we find that this role is not confined to one area of the country, but rather is dispersed. This is true for both the replacement of regional jets by turboprops and the deployment of turboprops on emerging routes. After years of growing the aviation system in the east, the CAAC has made Western and Southern China a priority. Turboprops could serve these areas with lower fuel costs and reduced environmental impact at a high enough level to well balance the increase in travel time for passengers. Providing funds through the CAAC sustainability fund for the adoption of turboprops could both support emerging aviation markets in China and promote environmental sustainability. Acknowledgement The authors would like to thank masFlight for providing the scheduled flight data for analysis.

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