Nicole Adler | The Hebrew University of Jerusalem (original) (raw)

Papers on Aviation by Nicole Adler

This paper presents a framework to analyze global alliances and mergers in the airline industry ... more This paper presents a framework to analyze global alliances and mergers in the airline industry
under competition. The
framework can help airlines identify partners and network structures, and help governments
predict changes in social wel- fare before accepting or rejecting proposed mergers or alliances.
The research combines proﬁt-maximizing objectives to cost-based network design formulations
within a game theoretic framework. The resulting analysis enables merging air- lines to choose
appropriate international hubs for their integrated network based on their own and their
competitors’ costs and revenues in the form of best response functions. The results of an
illustrative example suggest that some mergers may be more successful than others and optimal
international gateway choices change according to the number of competitors remaining in the
market. Furthermore, although the pressure on airlines would suggest a strong preference for
mergers or alliances, perhaps surprisingly, the solution outcomes whereby all airlines merge or ally are not equilibria in the overall game.

This paper disaggregates aircraft operating costs into various cost categories and provides back... more This paper disaggregates aircraft operating costs into various cost categories and provides
background for an engineer-
ing approach used to compute a generalized aircraft trip cost function. Engineering cost values for
speciﬁc airplane designs
were generated for a broad spread of operating distances, enabling a direct analysis of the
operating cost function and
avoiding the problems associated with ﬁnancial reporting practices. The resulting data points were
used to calibrate a cost
function for aircraft trip expenses as they vary in seating capacity and distance. This formula and
the parameter values are
then compared to econometric results, based on historical data. Results are intended to be used to
adjust reported costs so
that conclusions about industry structure based on cost regressions correctly account for
diﬀerences in stage lengths and
capacities. A Cobb–Douglas cost function is also computed, providing elasticity parameters for both
economies of density,
through seat capacity, and distance as they would be determined from clean airline-neutral data.
The results are particu-
larly useful for route network design because they establish a simple planar connection between
frequency, capacity and
costs. Although the econometric cost functions are no less accurate, it is generally much less convenient for subsequent
analysis.

The aim of this paper is to present a model structure that analyses the hub-spoke network design ... more The aim of this paper is to present a model structure that analyses the hub-spoke network design issue within a competitive framework. Under deregulation, airlines have developed hub-and-spoke networks enabling them to increase frequency by aggregating demand and to prevent
entry into the marketplace by reducing airfares. Whilst liberalization in the United States and Europe was undertaken in order to increase competition, the results in this direction are unclear. This research evaluates airline profits based on a micro-economic theory of its behavior under deregulation and its use of hub-and-spoke networks. Through a two-stage Nash best-response game, we search for equilibria in the air-transportation industry. The game is applied to Western Europe where profitable hubs and monopolistic equilibria are clearly identifiable and duopolistic equilibria are potentially possible given sufficient demand.

This paper develops, evaluates and ultimately aids in the choosing of an optimal, single allocat... more This paper develops, evaluates and ultimately aids in the choosing of an optimal, single
allocation, hub-
and-spoke network for an airline working in a deregulated market. An integer linear program
evaluates potential hub network combinations, whose profits are then determined using a non-linear
mathematical program. International gateway airports and regional hubs, profit, frequency and
aircraft size are the decision variables. An adapted, conjugate-gradient projection algorithm is
developed and the models are
subsequently applied to Western Europe.

Under deregulation, airlines developed hub-and-spoke (HS) networks enabling them to aggregate de... more Under deregulation, airlines developed hub-and-spoke (HS) networks enabling them to aggregate
demand, increase
frequency, reduce airfares and prevent entry into the marketplace. This research evaluates airline
profit based on micro- economic theory of behaviour under deregulation. Through a two-stage Nash
best-response game, equilibria in the air transportation industry is sought to evaluate the most
profitable HS network for an airline to survive in a deregulated environment. In the first stage of
the game, an integer linear program aids in generating potential networks. In the second stage, a
nonlinear mathematical program maximizes profits for each airline, based on the networks chosen by
all participants. The variables of the mathematical program include frequency, plane size and
airfares. In an illustrative
example, both monopoly and duopoly solutions are attainable as a function of demand.

This paper focuses on measuring and comparing productive efﬁciency and proﬁtability amo... more This paper focuses on measuring and comparing productive efﬁciency and proﬁtability among
airports owned and operated by
government departments, 100% government-owned corporations, independent airport authorities,
mixed enterprises with government majority ownership and mixed enterprises with private majority
ownership. The analysis is based on a cross-sectional, time-series dataset (2001–2003) for the
major Asia-Paciﬁc, European and North American airports. There is strong evidence that airports
with government majority ownership and those owned by multi-level of government are signiﬁcantly
less efﬁcient than airports with a private majority ownership; there is no statistically
signiﬁcant evidence to suggest that airports owned and operated by US government
branches, independent airport authorities in North America, or airports elsewhere
operated by 100% government corporations have lower operating efﬁciency than airports with
a private majority ownership; airports with a private majority ownership achieve
signiﬁcantly higher operating proﬁt margins than other airports; whereas airports with
government majority ownership or multi-level government ownership have the lowest operating
proﬁt margin; and generally, airports with a private majority ownership derive a much
higher proportion of their total revenue from non-aviation services than any other category
of airports while offering signiﬁcantly lower aeronautical charges than airports in other
ownership categories excluding US airports. The results suggest that private–public–partner- ship
with minority private sector participation and multi-level governments’ ownership should be
avoided, supporting the majority
private sector ownership and operation of airports.

Transportation Research Part A-policy and Practice, 2005

This research aims to estimate potential inter-regional passenger flows for air transport in the ... more This research aims to estimate potential inter-regional passenger flows for air transport in the Middle East under open skies polices, once deregulation agreements are reached between neighboring countries. To arrive at reasonable demand estimates, Western and Eastern European demand data was analyzed as a first step, since it is assumed that current Middle Eastern demand is distorted as a direct result of regional political instability. The major factors affecting demand, based on the European dataset, included population size, gross domestic product (GDP) per capita, absolute difference in GDP per capita between two countries, great circle distance and membership of the European Union and World Trade Organization. Subsequently, a 21 country database was estimated for passenger flow in the Middle East region on an average peak season day. The demand estimations became input for a hub location model (p-hub median formulation) in order to achieve the second major aim of this research, objective identification of potential regional gateways. The results proved robust to both single and multiple allocation model assumptions, with Cairo and Tehran consistently achieving hub status, along with Istanbul and Riyadh, as the number of potential hubs increased. Finally, this research shows that under conditions of peace, given existing socio-economic indicators, inter-regional passenger demand flow could increase by upwards of 51% and regulatory authorities ought to consider the necessary infrastructure and demand management policies to enable the conservative regional demand growth estimated.

Journal of International Business Studies, 2007

This research develops a location-allocation, mixed integer linear model that simultaneously eval... more This research develops a location-allocation, mixed integer linear model that simultaneously evaluates a substantial number of multinational enterprise (MNE) location and control configurations to yield an optimal network, considering R&D, production and marketing facilities, produced in-house and/ or outsourced. The model places special emphasis on the role of intra-firm, inter-firm and extra-firm knowledge flows in addressing cost minimisation considerations of MNEs. A simulation analysis is undertaken to evaluate potential solutions from such a framework and to analyse their consistency with theoretical expectations.

Papers on DEA by Nicole Adler

This research further develops the combined use of principal component analysis (PCA) and data en... more This research further develops the combined use of principal component analysis (PCA) and data envelopment analysis (DEA). The aim is to reduce the lack of discriminatory power that occurs in DEA when there are an excessive number of inputs and outputs in relation to the number of decision-making units. Three separate PCA-DEA formulations are developed in the paper. The first formulation introduces assurance regions using PCA weights as objectively based constraints on groups of adapted data. The second and third formulations apply PCA to all inputs and separately to all outputs. Subsequently, all PCs are utilized, objective assurance region constraints are applied and discrimination is maximized without any loss of information. The third formulation searches for a single set of global weights with which to fully rank all observations. In summary, it is clear that the use of PCs can dramatically improve the strength of DEA models.

Within data envelopment analysis (DEA) is a sub-group of papers in which many researchers have s... more Within data envelopment analysis (DEA) is a sub-group of papers in which many researchers have
sought to im-
prove the diﬀerential capabilities of DEA and to fully rank both eﬃcient, as well as ineﬃcient,
decision-making units.
The ranking methods have been divided in this paper into six, somewhat overlapping, areas. The ﬁrst
area involves the
evaluation of a cross-eﬃciency matrix, in which the units are self and peer evaluated. The second
idea, generally known
as the super-eﬃciency method, ranks through the exclusion of the unit being scored from the dual
linear program and
an analysis of the change in the Pareto Frontier. The third grouping is based on benchmarking, in
which a unit is highly
ranked if it is chosen as a useful target for many other units. The fourth group utilizes
multivariate statistical tech-
niques, which are generally applied after the DEA dichotomic classiﬁcation. The ﬁfth research area
ranks ineﬃcient
units through proportional measures of ineﬃciency. The last approach requires the collection of
additional, preferential
information from relevant decision-makers and combines multiple-criteria decision methodologies
with the DEA ap-
proach. However, whilst each technique is useful in a specialist area, no one methodology can be
prescribed here as the
complete solution to the question of ranking.

Omega-international Journal of Management Science, 2008

This paper introduces a methodology that permits presentation of the results of data envelopment ... more This paper introduces a methodology that permits presentation of the results of data envelopment analysis (DEA) graphically. A specialized form of multi-dimensional scaling, Co-Plot, enables presentation of the DEA results in a two-dimensional space, hence in a clear, understandable manner. When plotting ratios rather than original data, DEA efficient units can be visualized clearly, as well as their connections to specific variables and/or ratios. Furthermore, Co-Plot can be used in an exploratory data analysis to identify outliers, whose data require additional scrutiny, and potentially inconsequential variables that could be aggregated or removed from the analysis with little effect on the subsequent DEA results.

The purpose of this chapter is to present data envelopment analysis (DEA) as a two-dimensional pl... more The purpose of this chapter is to present data envelopment analysis (DEA) as a two-dimensional plot that permits an easy, graphical explanation of the results. Due to the multiple dimensions of the problem, graphical presentation of DEA results has proven somewhat elusive up to now. Co-Plot, a variant of multidimensional scaling, places each decision-making unit in a two-dimensional space in which the location of each observation is determined by all variables simultaneously. The graphical display technique exhibits observations as points and variables (ratios) as arrows, relative to the same center-of-gravity. Observations are mapped such that similar decision-making units are closely located on the plot, signifying that they belong to a group possessing comparable characteristics and behavior. In this chapter, we will analyze 19 Finnish Forestry Boards using Co-Plot to examine the original data and then to present the results of various weight-constrained DEA models, including that of PCA-DEA.

Socio-economic Planning Sciences, 2010

Millennium development goals Human development index Data envelopment analysis Principal componen... more Millennium development goals Human development index Data envelopment analysis Principal component analysis a b s t r a c t This research develops a framework to estimate the relative efficiency of developing countries in utilizing both their domestic and external resources to achieve the Millennium Development Goals. The analysis highlights distinct efficiency differences across lending groups and geographic regions e.g. between Sub-Saharan Africa and Latin America. The performance of regions exposed to natural disasters and political violence need to be analyzed individually and risk management ought to be an integrated part of development policy. The gap between the Millennium Development Goals and human rights approaches is then examined. Finally, we qualify a country's performance level as potentially sustainable in terms of human, social and environmental welfare, in turn searching for realistic benchmarks and intermediate targets for the relatively inefficient countries. Principal component analysis in combination with data envelopment analysis was applied to solve the problem of efficiency overestimation with multidimensional scaling used to present the issue graphically. In summary, the aim of this work is not to rank countries in a league table rather to provide a framework that combines economic, environmental and social issues in order to search for sustainable, pragmatic benchmarks, pushing the boundaries of the Human Development Index.

European Journal of Operational Research, 2010

Within the data envelopment analysis context, problems of discrimination between efficient and in... more Within the data envelopment analysis context, problems of discrimination between efficient and inefficient decision-making units often arise, particularly if there are a relatively large number of variables with respect to observations. This paper applies Monte-Carlo simulation to generalize and compare two discrimination-improving methods; principal component analysis applied to data envelopment analysis (PCA-DEA) and variable reduction based on partial covariance (VR).

Transport Policy, 2001

The main objective of this paper is to develop a model to determine the relative ef®ciency and qu... more The main objective of this paper is to develop a model to determine the relative ef®ciency and quality of airports. This factor seems to have a strong effect on the airlines' choice of hubs. Previous studies of airport quality have used subjective passenger data whereas in this study airport quality is de®ned from the airlines' viewpoint. Accordingly, we have solicited airlines' evaluations of a number of European and non-European airports by means of a detailed questionnaire. Statistical analysis of the median score has shown that these evaluations vary considerably relative to quality factors and airports. The key methodology used in this study to determine the relative quality level of the airports is Data Envelopment Analysis (DEA), which has been adapted through the use of principle component analysis. Of the set of West-European airports analyzed, Geneva, Milan and Munich received uniformly high, relative ef®ciency scores. In contrast, Charles de Gaulle, Athens and Manchester consistently appear low in the rankings. q

US experience shows that deregulation of the airline industry leads to the formation of hub-and-s... more US experience shows that deregulation of the airline industry leads to the formation of hub-and-spoke (HS) airline networks. Viewing potential HS networks as decision-making units, we use data envelopment analysis (DEA) to select the most efficient networks configurations from the many that are possible in the
deregulated European Union airline market. To overcome the difficulties that DEA encounters when there is an excessive number of inputs or outputs, we employ principal component analysis (PCA) to aggregate certain, clustered data, whilst ensuring very similar results to those achieved under the
original DEA model. The DEA-PCA formulation is then illustrated with real-world data gathered from the West European air transportation industry.

Papers by Nicole Adler

IMPRINT-EUROPE seminar, …, 2003

... Nicole Adler, School of Business Administration, Hebrew University of Jerusalem, Israel. e-ma... more ... Nicole Adler, School of Business Administration, Hebrew University of Jerusalem, Israel. e-mail: msnic@mscc.huji.ac.il Chris Nash Institute for Transport Studies, Leeds University, United Kingdom. e-mail: cnash@its.leeds.ac.uk Esko Niskanen ...

Operations Research

In “Identifying Merger Opportunities: The Case of Air Traffic Control,” N. Adler, O. Olesen, and ... more In “Identifying Merger Opportunities: The Case of Air Traffic Control,” N. Adler, O. Olesen, and N. Volta propose a model to identify an optimal horizontal merger configuration at the level of an industry or firm with multiple branches. Assuming that each firm operates within a catchment area or owns part of a network, we extend the model to consider feasible mergers that cover a contiguous area, should network effects be a consideration. An application to the European air traffic control system suggests that four contiguous air navigation service providers should replace the current 29 providers and the nine functional airspace blocks proposed in the Single European Skies initiative. The technological developments in air traffic management in which regulators on both sides of the Atlantic have invested heavily, namely SESAR and NextGen, are unlikely to be used without a concomitant reduction in operating costs through economies of scale. We find that the politically oriented soluti...

Competition and regulation (when lacking the former) outrank ownership

Air traffic is recognised to bring benefits to the local economy, in terms of both cargo and pass... more Air traffic is recognised to bring benefits to the local economy, in terms of both cargo and passenger mobility. European airports are implementing several measures to reduce aircraft noise, in line with the European Commission regulation and the International Civil Aviation Organisation’s proposal of the so-called balanced approach. Noise exposure estimates are gathered from the European Environment Agency, which collects information on European Union member states’ airports. Different strategies can be implemented to reduce the noise or mitigate its effects, including the appropriate design and production of aircraft and airport collaboration with authorities and neighbourhood associations. Reduction of noise at the source consists of the appropriate design and production of aircraft, focusing on the reduction of engine noise and addressing airframe noise aerodynamic construction which generates low drag. Milan Bergamo Airport has been actively involved in environmental programmes...

Transportation Research Part A-policy and Practice, 2005

Journal of International Business Studies, 2007

Omega-international Journal of Management Science, 2008

Socio-economic Planning Sciences, 2010

European Journal of Operational Research, 2010

Transport Policy, 2001

IMPRINT-EUROPE seminar, …, 2003

Operations Research

Competition and regulation (when lacking the former) outrank ownership

The Palgrave Handbook of Economic Performance Analysis, 2019

Within the field of data envelopment analysis is a sub-group of papers in which many researchers ... more Within the field of data envelopment analysis is a sub-group of papers in which many researchers have sought to improve the differential capabilities of DEA and to fully rank both efficient, as well as inefficient, decision-making units. We have divided the ranking concepts into seven general areas based on the following concepts: super-efficiency, benchmarking, cross-efficiency, common set of weights, multivariate statistics, multi-criteria decision-making and inefficiency dominance. After describing the approaches, we compare and contrast them using an illustration drawn from a set of universities. It is apparent that the approaches succeed in strengthening the results of the non-parametric data envelopment analysis models and frequently enable an almost complete ranking of decision-making units. However, the results may diverge substantially between the different models, suggesting that the choice of framework must be context dependent and chosen with great care.

European Journal of Operational Research, 2021

Transport markets involve interactions between multiple groups of decision-makers, hence they are... more Transport markets involve interactions between multiple groups of decision-makers, hence they are good candidates to be analyzed through the prism of game theory. The many models and algorithms published to date tend to reflect different academic disciplines, including operations research, economics and engineering approaches. Models published in the operations research oriented journals often involve large network components in order to provide relatively specific insights, building on Stackelberg, Wardrop and traffic assignment formulations. Game-theoretic models published in economics journals are frequently conceptual with stylized assumptions, such as Cournot, Bertrand and Hotelling, all of which have been applied to transportation markets. We present the more common models and highlight the differences in the equilibria outcomes drawing from the choice of model and beliefs of the players in the market. We discuss the most widely applied algorithms and formulations utilized to solve network-based transport markets. Finally, we review the published literature with real-world applications and discuss potential new areas yet to be explored substantially, including the analysis of multi-modal markets involving both competition and cooperation across transport modes.

International Transport Forum Discussion Papers, 2017

Transportation Research Part A: Policy and Practice, 2020

The ownership form of Air Navigation Service Providers varies across countries ranging from state... more The ownership form of Air Navigation Service Providers varies across countries ranging from state agencies belonging to the Department of Transport, to government-owned corporations, to semi-private firms with for-profit or not-for-profit mandates. This research focusses on the link between the performance of ANSPs and their ownership form. A theoretical economic model suggests that effort to achieve cost efficiency will be higher in the case of public companies with a board of stakeholders composed of airspace users and in the case of private companies in which stakeholders are also shareholders. A stochastic frontier analysis estimation of the production and cost functions of 37 European air navigation service providers over nine years suggests that the public-private ownership form achieves statistically significantly higher cost and productive efficiency levels compared to either a government corporation or a state agency.

Transportation Research Part A: Policy and Practice, 2018

We assess the value of a marginal change in the number of slots at congested airports from the pe... more We assess the value of a marginal change in the number of slots at congested airports from the perspective of the different stakeholders including airports, airlines and passengers. We analyze the trade-off between the benefits, in the form of revenues for airlines and airports as well as greater variety for passengers and the costs that arise from delays. Utilizing a non-parametric structural equation modeling approach, we compare a set of US airports with their first-come first-served policy to those of Europe in which slots are allocated according to grandfather rights. Delays in Europe are much lower than their US counterparts, suggesting that regulation in Europe could be relaxed leading to increased movements and relatively minor increases in delays hence higher overall social welfare. Perhaps surprisingly, we also find that the introduction of slots in the US (or reduction in slots allocated at the four currently constrained airports) would not necessarily increase overall social welfare. In summation, European regulation prevents optimal use of current infrastructure whereas the US system is better able to capitalize on their existing infrastructure.

Global Strategy Journal, 2019

A long-standing void in international business literature is understanding whether and how the in... more A long-standing void in international business literature is understanding whether and how the internalization choices of competing multinational enterprises (MNEs) affect each other. This paper presents a game-theoretic, location-allocation mathematical model that predicts the organizational boundaries of competing MNEs. Given multiple players in the market, the game analyzes the competition between MNEs with respect to market share, yielding Nash equilibria that determine how many MNEs will be left in the market, and whether their production and marketing sites are internalized or outsourced. Results of computational experiments suggest that the internalization choices of profit maximizing MNEs that compete with each other, sharply deviate from the internalization choices ignoring such competition.

Global Strategy Journal, 2015

In this study we argue that when undertaking location decisions multinational enterprises (MNEs) ... more In this study we argue that when undertaking location decisions multinational enterprises (MNEs) ought to incorporate their competitors' reactions to such decisions as well as consumer preferences for location, in addition to the more standard cost-benefit analyses. We view MNEs as networks of activities connected via product and knowledge flows and develop a game-theoretic, location-allocation mathematical model. A series of computational analyses leads to competitive outcomes and location choices, where even without an explicit modeling of inter-region differences, MNEs show strong tendency towards regionally focused location configurations. Importantly, such regionally focused location configurations can take the shape of regionally focused MNEs or of globally dispersed MNEs with a regional structure.

Transportation Research Part B: Methodological, 2016

We compare aviation markets under conditions of competition, codesharing contracts and antitrust ... more We compare aviation markets under conditions of competition, codesharing contracts and antitrust immune alliances, assuming that demand for flights depends on both fares and the level of frequency offered. Using a hybrid competitive/cooperative game theoretic framework, we show that the stronger the inter-airline agreement on overlapping routes, the higher the producer surplus. On the other hand, consumer surplus and overall social welfare are maximized under limited codesharing agreements. Partial mergers appear preferable to no agreement in 'thin' markets, in which both demand and profit margins are relatively low. Intergovernmental agreements are also analyzed and we show that bilaterals create the least favorable market outcomes for consumers and producers. Finally, a realistic case study demonstrates that under asymmetric and uncertain demand, codesharing on parallel links may be preferable to competitive outcomes for multiple consumer types.

Economics of Transportation, 2015

This paper provides evidence of the impacts of the level of liberalization signed between governm... more This paper provides evidence of the impacts of the level of liberalization signed between governments and the type of codeshare agreement signed between airlines in international aviation markets. Our work distils two basic insights: (i) increasing the level of liberalization has a positive effect on service and overshadows the impact of codeshares; (ii) codeshare agreements are heterogeneous in the sense that pooling and royalty agreements generally result in higher airfares whereas block and free sale codeshares are generally associated with lower airfares, although the latter has the most significant impact. Additionally, none of the codeshare agreements impact market frequency. Our results suggest that reducing regulation in the international aviation markets is likely to increase service levels, and that carve outs on non-stop links is unnecessary, rather restrictions should be imposed on horizontal contracts such as the type of codeshare agreement signed by airlines.

Transport Policy, 2015

ABSTRACT

Modeling Data Irregularities and Structural Complexities in Data Envelopment Analysis

ABSTRACT The purpose of this chapter is to present the combined use of principal component analys... more ABSTRACT The purpose of this chapter is to present the combined use of principal component analysis (PCA) and data envelopment analysis (DEA) with the stated aim of reducing the curse of dimensionality that occurs in DEA when there is an excessive number of inputs and outputs in relation to the number of decision-making units. Various PCA-DEA formulations are developed in the chapter utilizing the results of principal component analyses to develop objective, assurance region type constraints on the DEA weights. The first set of models applies PCA to grouped data representing similar themes, such as quality or environmental measures. The second set of models, if needed, applies PCA to all inputs and separately to all outputs, thus further strengthening the discrimination power of DEA. A case study of municipal solid waste managements in the Oulu district of Finland, which has been frequently analyzed in the literature, will illustrate the different models and the power of the PCA-DEA formulation. In summary, it is clear that the use of principal components can noticeably improve the strength of DEA models.