Predicting the Market Share of a New Airport in Multi-Airport Cities

220 Pages·2016·3.1 MB·English

by  Samson Oladele Fatokun

Dissertations and Theses
5-2016
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Samson Oladele Fatokun
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PREDICTING THE MARKET SHARE OF A NEW AIRPORT IN MULTI-
AIRPORT CITIES: THE CASE OF LAGOS

by

Samson Oladele Fatokun

A Dissertation Submitted to the College of Aviation
in Partial Fulfillment of the Requirements for the Degree of
Doctor of Philosophy in Aviation

Embry-Riddle Aeronautical University
Daytona Beach, Florida
May 2016
© 2016 Samson Oladele Fatokun

All Rights Reserved

ABSTRACT
Researcher: Samson Oladele Fatokun
Title: PREDICTING THE MARKET SHARE OF A NEW AIRPORT IN
MULTI-AIRPORT CITIES: THE CASE OF LAGOS
Institution: Embry-Riddle Aeronautical University
Degree: Doctor of Philosophy in Aviation
Year: 2016
The primary objective of the study was to develop an empirical model that combines the
contingent valuation method (CVM) with the isochrone analysis to predict the market
shares of new airports in multi-airport cities and to apply the model to the case of Lekki
International Airport (LIA), the proposed second airport in Lagos, Nigeria. In addition to
predicting the market share that LIA could attain, the study also identified and analyzed
the catchment areas as well as the willingness to pay (WTP) of would-be LIA passengers.
Furthermore, the research identified the determinants of airport choice in the Nigerian
market.
The CVM was used for the collection of the data; 1,176 valid in-person interviews
were conducted at Murtala Mohammed International Airport (MMIA), Lagos.
Descriptive statistics and logistic regression analysis were used to predict LIA’s market
share and identify the factors that influenced passengers’ choice between the existing and
the proposed second airport. Further, isochrones and passenger stated preference data
were analyzed for the determination of the LIA’s catchment areas for the business and
non-business segments of the Nigerian market as well as the areas of spatial competition
between MMIA and LIA. With regard to the passengers’ willingness to pay, the median
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of the WTP values was determined through descriptive statistics. The determinants of the
WTP were also identified using a multiple regression analysis.
Using the combination of CVM and isochrone analysis, the present research
predicted that LIA will attain 28.9% of the market share based on the contingent scenario
presented to the passengers. Further, the study found that the exclusive catchment areas
of LIA for business and non-business passengers were limited to two Local Government
Areas (LGAs) of Lagos State. Passengers who chose LIA as their first choice were
willing to pay NGN3000 (about $15 or 15% of an average domestic one-way ticket price)
as additional fare to fly from the airport. However, the realization of the predicted
market share will be contingent on LIA’s ability to attract airlines, remedy the isolation
of the proposed airport site, and apply the appropriate pricing policy.

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DEDICATION
The present research is dedicated to God and to the burgeoning aviation industry
in Africa. It is dedicated to those who work hard every day toward the growth of the
aviation industry in Africa and the increase of its contribution to economies and the
welfare of the people of the continent.
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ACKNOWLEDGEMENTS
To God be the glory. All honor and power to the almighty God, the Sustainer of
my life and He who has given me all the resources toward the completion of this course.
I would like to thank my “Babe” and dear wife Adebola Adejoke sincerely for her
patience, long-suffering, encouragement, and unflinching support during the doctorate
program.
Furthermore, I would like to express my deep appreciation and gratitude to my
Committee Chair, Dr. Steven Hampton, for the patient guidance and mentorship he
provided to me, all the way from when I applied for the Ph.D. in Aviation program until
completion of the program. I would also like to thank my committee members, Drs.
Dothang Truong, Chunyan Yu, and Mr. Brian Pearce for the guidance, thought-
provoking suggestions, and the general cooperation I got from each of them over the
years. In a similar vein, I would like to recognize Dr. Alan Stolzer for his invaluable
advice during my years of study at Embry Riddle Aeronautical University, Daytona
Beach, Florida.
I acknowledge the moral and spiritual support I got from the pastors, the deacons,
and friends from Christ Baptist Church, Gbagada, Lagos, and my valuable colleagues at
the IATA office in Lagos, Nigeria.

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TABLE OF CONTENTS
Page
Committee Signature Page ................................................................................................. ii
Abstract .............................................................................................................................. iii
Dedication ............................................................................................................................v
Acknowledgements ........................................................................................................... vii
List of Tables ................................................................................................................... xiv
List of Figures .................................................................................................................. xvi
Chapter I Introduction ...............................................................................................1
Prediction of the Market Share of a Proposed Second Airport ........8
Combination of the Contingent Valuation Method and
Isochrone Analysis ...........................................................................9
Significance of the Study ...............................................................10
Statement of the Problem ...............................................................11
Purpose Statement ..........................................................................11
Research Questions ........................................................................12
Delimitations ..................................................................................12
Limitations and Assumptions ........................................................13
Definition of Terms........................................................................13
List of Acronyms ...........................................................................14
Chapter II Review of the Relevant Literature ...........................................................16
Background of Airport Competition and the Search for
Market Share ..................................................................................16
Comparative Overview of African and European
Airport Markets ..................................................................16
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Perception of Airports as Natural Monopolies ..................20
Emergence of Airport Competition ...................................21
Airport Market Power ........................................................22
Emergence and Increasing Prominence of Secondary
Airports ..............................................................................24
Competition Dynamics Between Primary and Proposed
Secondary Airports ........................................................................27

Prediction of the Market Share of Proposed Second Airports .......29

Booz & Company’s Model ................................................29
Limitations of the Booz & Company’s Model ..................32
The Catchment Area Analysis ...........................................32
Isochrone Analysis .............................................................34
Limitations of the Catchment Area Analysis .....................35
Contingent Valuation and Stated Preference Approach ................36
Reliability and Validity of CVM Results...........................38
Respondents’ Uncertainty in CVM ....................................40
Applications of the CVM to Air Transport Studies ...........42
Application to Public Transport Studies in Dubai ..............43
Application to the Evaluation of the Benefits of a
Regional Airport in Germany ............................................43

Application to the Demand Valuation of London
Heathrow Airport, UK .......................................................45

Application of CVM in Developing Countries ..................46

Limitations of the Contingent Valuation Method ..............47

Summary ........................................................................................48
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