Game Theory Analysis of Aircraft Manufacturer Innovation Strategies in the Face of Increasing Airline Fuel Costs

摘要

The air transportation system is a vital infrastructure that enables economicgrowth and provides significant social benefits. Future increases and volatility in crudeoil prices, as well as environmental charges, are likely to increase the effective cost offuel. We investigate the impacts of effective fuel cost increase on the US air transportation system historically and perform a game theory analysis of the impact ofmanufacturer competition on the introduction of new, more fuel efficient aircraft.The cost of jet fuel increased 244% between July 2004 and July 2008, providing a natural experiment to evaluate how fuel price increase affected continental US networks and fleets. It was found that non-hub airports serving small communities lost 12% ofconnections, compared to a system-wide average loss of 2.8%. Increased effective fuel costs will provide incentives for airlines to improve fleet fuel efficiency, reducing theenvironmental impacts of aviation, but may cause an uneven distribution of social and economic impacts if small communities suffer greater loss of mobility. Governmentaction may be required to determine acceptable levels of access as the system transitionsto higher fuel costs.Technology innovation may act as a long-term hedge against increasing effectivefuel costs, enabling mobility to be maintained. The single aisle commercial aircraftmarket segment is the largest, but has the longest running product lines. We hypothesizethat competition has important effects on manufacturers’ decisions to innovate that mustbe considered when designing policies to reduce fleet emissions. An aircraft programvaluation model is developed to estimate expected payoffs to manufacturers undercompetitive scenarios. A game theory analysis demonstrates how the incentives toinnovate may be altered by subsidies, technology forcing regulations, increased effectivefuel costs, the threat of new entrants, and long-term competitive strategies. Increasedcompetition may result in incumbent manufacturers producing re-engined aircraft while increased effective fuel costs may result in new aircraft programs. Incumbents’ optimalstrategies may be to delay the entry of new single aisle aircraft until 2020-24, unlesstechnology forcing regulations are implemented.