Air - Sea Transport: Competitiveness or Complementarity in the Greek insular market?

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This paper deals with the air and coastal shipping industries in the Greek insular

market and the relationship they have developed in the passenger transport area.

This specific geographical region is characterized by a large number of islands

that need regular transport services for the passengers mobility all year round but

especially during the peak summertime season, covering a high level of demand.

There is a considerable number of small regional airports in the islands that

operate as an alternative solution against sea transport, that today has the biggest

transport market share. The article focuses on the notions of competitiveness and

complementarity that may or may not exist between these two transport means.

The above notions are approached through surveys that have been conducted by

the Laboratory of Transport Economics of the Maritime Department of the

University of Piraeus. The market analysis that resulted from the research studies

on the users of both air and sea transport is presented as well as their impact on

the operational policy of the air carriers.

1. Introduction

Sea transport has always been the main way for the transportation of both

passengers and cargo in the Greek insular market. Since the mid of last century

the rapid development of air transport has caused many changes in the transport

market of insular Greece. Can the present situation in the aforementioned region

be characterized as competitive or complementarity between the two modes?

In this question we reply through a survey that took place in three main routes for

both sea and air passengers. In order to format an answer to the above question it

is essential to develop the passenger's profile and therefore the needs that form

the demand for each transport mode.

2. Coastal shipping and air transport passenger market in

insular Greece

2.1 A market analysis

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Up until the beginning of 1990, the Greek air transport market was a

monopolistic one served by the national air carrier Olympic Airways. On July

1991 the internal air transport market was liberalized for airbuses, goods

transport and charter flights. Civil Aviation stays responsible for the provision of

licenses. Since the liberalization new private companies have entered the market,

while in the same year the market share of O.A. was 69% (52% in 1999). Today,

the domestic air transport market has the oligopoly characteristics, since there are

very few operators that are interrelated and depended regarding their decision

making and are offering homogeneous products. Referring to the competition

base air carriers focus on price levels. The price competition strategies, the air

transport companies have developed, have been in favor of big carriers that have

economies of scale and consequently can afford low cost operation.

Coastal transport in the Greek region could be characterized as a diverse,

regulated oligopoly for two main reasons. First of all it posses the two main

characteristics of an oligopoly, that are:

- the existence of a small number of enterprises offering tonnage that are

highly interrelated and depended regarding their decision making

- the offering of homogenous or diverse products [1]

The notion of the 'diversified product' lies within the preferences of its

consumer, whether they are real or deceptive ones, towards the specific product

the oligopoly offers [2]. The main objective for the oligopoly is how to diversify

the offered product always in comparison with the competition. In coastal sea

transport, the involved enterprises are avoiding any price competition and choose

to compete through diversification strategies. The aim is to attract more

passengers focusing on quality factors [3], such as speed, improved areas for

passengers, trained personnel etc.

Secondly, the Greek coastal shipping industry is characterized by intense state

intervention and regulation that has to do with the route scheduling, the fare, the

license to enter the market [4]. This situation is about to be altered after the

liberalization of the market on November 1st 2002, according to the E.U.

directives on fair competition.

2.2 The structure of the market

Until the beginning of 1990, the Greek market was serviced by the Olympic

Airways company covering a network of 35 destinations-airports, 9 of which are

in the mainland and 24 are in the islands (figure 1). The network is a radial one,

with every airport having connection principally with the Athens airport ans

secondlarly with Thessaloniki airport [5]. Generally, the connection between the

major urban and tourist centers is adequate, apart from some small exceptions.

The main problem is congestion and inadequate service especially during peak

hours. On July 1991 the internal air transport market was liberalized and more

carriers are involved in the market. Yet O.A. holds the largest market share since

more than 3,5 millions of passengers traveled with the national carrier in 1999.

Coastal shipping undertakes the greatest part of the passenger flow to the island

regions, whether for domestic tourism, or for foreign visitors. Especially for the

smaller islands, that have no airports and ships constitute their only means of

transportation, the frequency and regularity of calls is a decisive factor in being

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chosen as a destination (Table 1). The coastal shipping transportation network

appears especially complex [6], since it includes over 100 islands to serve, 190

passenger ports, 150 of which service coastal shipping lines, 1200 direct

connections between ports with a frequency of at least once a week and satisfies a

demand of over 15 million passengers per year (figure 2).

Table 1: Passenger movement to the main coastal shipping routes islands in


Main routes By air By sea Total traffic

Athens - Kos 47,5% 52,5% 231.936

Athens - Rhodes 52,9% 47,1% 535.163

Athens - Kassos 1,5% 98,5% 2.275

Athens - Karpathos 39,4% 60,6% 20.535

Athens - Astipalaia 26,3% 73,7% 8.318

Athens- Leros 16,4% 83,6% 46.826

Athens - Syros 9,2% 90,8% 216.203

Athens - Myconos 26,0% 74,0% 492.923

Athens - Santorini 34,9% 65,1% 403.120

Athens - Milos 20,1% 79,9% 82.396

Athens - Paros 7,5% 92,5% 599.330

Athens - Naxos 4,8% 95,2% 325.161

Athens - Chania 22,5% 77,5% 855.108

Athens - Heraclio 31,3% 68,7% 1.192.153

Athens - Siteia 15,4% 84,6% 13.189

Athens - Limnos 67,1% 32,9% 125.553

Athens - Mytilini 41,0% 59,0% 444.703

Athens - Chios 43,5% 56,5% 303.508

Athens - Samos 46,5% 53,5% 255.916

Athens - Skiathos 32,2% 67,8% 74.452

Athens - Skiros 14,9% 85,1% 19.489

Athens - Kithira 75,0% 25,0% 21.358

Total 30,4% 69,6% 6.269.615

Source: Hellenic National Statistics Services, Statistical Tables of Greece

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Figure 1: O.A. Air transport network

Figure 2: Coastal shipping network

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The existing coastal shipping network is a radial one with the port of Piraeus

being the most important point in the transportation network. This means that the

majority of the coastal shipping lines starts and ends at the port of Piraeus, which

causes important congestion and delay problems to the port, especially during

peak traffic periods.

2.3. Transport demand structure

Demand for transport is considered to derive from the demands for the goods or

services that transport helps to produce (derived demand). Therefore passenger

transport derives from the need of passengers to travel for professional reasons,

recreation etc. The main determinants of sea transport demand [7] in our case


- the price of the ticket (fare)

- the existence of substitute transport means (air transport)

- the population of the region

- the income levels of the population

- the quality of the offered transport product

- the preferences of the consumers and

- the seasonal character of Greek coastal shipping (peak and off peak


For air transport, the determining factors of demand are identical to those of the

coastal passenger shipping, except the income that plays a more important role in

air transportation since fares are more expensive related with the sea fares and

require higher incomes.

Another common characteristic of the air and sea transport is the seasonality of

demand, that in the case of air transport shows smaller peak periods and vice

versa. According to the Olympic Airways data, passenger transport shows

maximum on August (50% higher of the mean traffic) and minimum on February

(43% lower of the mean traffic).

2.4 Comparing the two sectors

By examining the data regarding the development of both sectors, it is concluded

that coastal shipping and air transport have shown unequal development over the

last years. It is also undeniable that competition, and there are markets where the

two transport modes are competitive, should be in favor of the airplane, due to its

favorable characteristics on quality. But why did sea transport showed a higher

level of development? What is going to happen after the liberalization of the

coastal shipping market? There are questions that we will try to answer with the

use of a survey conducted by the Laboratory of Transport Economics that reveals

the Greek passengers' profile and the way they perceive these two alternative

ways of travelling.

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3. Towards a typology of the users profile

3. 1. The survey

In order to understand the profile of the user of sea and air transport services a

survey were conducted, using questionnaires [8]. The survey took place in the

Western Airport of Elliniko and at the seaport of Piraeus on February 17th 2000.

The passenger sample was taken for three main destinations:

· Athens - Mytilini, Lesvos

· Athens - Rhodes and

· Athens - Heraclion, Crete

The above-mentioned destinations were chosen for the following reasons:

· They are the biggest islands in the regions of southern and northern Aegean


· They show major passenger flow during all seasons

· They have both sea and air ports, in contrast with other smaller islands

The dates of the surveys were chosen due to the fact that they represent an off

peak season with people moving not only for recreation or holidays as during the

summer high season.

A total number of 100 questionnaires were gathered for each mode of

transportation. The composition of the questioned passengers in both cases is

presented in the following table:

Table 3: Composition of Passengers

Destination By Sea By air

Male Female Total Male Female Total

Athens - Mytilini 23 9 32 20 14 34

Athens - Rhodos 25 9 34 19 12 31

Athens - Heracleon 22 12 34 26 9 35

70% 30% 65% 35%

3.2 The passengers' profile

In order to determine the passengers' profile four factors were taken into


· The age of the passengers

· The Occupation of the passengers

· The reason for the trip

· Whether they travel alone or with family/friends

· Whether they need private cars in their movement

The total results that form the passenger profile for both transport means is

presented in the following table 4.

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Table 4: Passenger profile

Coastal Passenger Shipping Air Transport

Sex 70% male, 30% female 65% male, 35% female

Age 18-30 years old (50%)

30-50 years old (42%)

>50 years old (6%)

<18 years old (2%)

18-30 (58%)

30-50 years old (24%)

>50 years old (18%)

<18 years old (0%)

Purpose of trip professional reasons 43%

military reasons 29%

recreation/holidays 12%

educational reasons 15%

health reasons 1%

professional reasons 33%

military reasons 24%

recreation/holidays 23%

educational reasons 12%

health reasons 8%



With family, friends (69%) Alone (60%)

Need of private


Yes (83%) Yes (70%)

As observed from above, there are similarities between the demographic

characteristics, although air transport is preferred mostly by young people aged

18-30, and all other ages (>30) have almost equal percentages. In sea transport

on the other hand, people aged 18-50 cover more than 90% of demand.

The main difference between the modes lies in the travelling status, where the

majority of air travelers, travel alone, apparently for cost reasons. The last

question had to do with the importance of road transportation and the

development of a combined passenger transport.

3.3 Passenger's perception towards air and sea transport

In order to understand the passengers' preferences towards the sea and air

transport as well as the reasons for choosing the one against the other mode, three

questions were addressed.

The first one deals with the reason for choosing the specific mode of transport.

The factors affecting their decisions categorized as following:

· the cost of the trip (c)

· the existence of a substitute means of transport (s)

· the quality of the service (q)

· the time the trip involves (t)

· the feeling of fear towards the mean (w)

· and whether the route was appealing (r)

Therefore demand for transport is a function of all the above parameters, that is

D = f (c, s, q, t, w, r)

Passengers are using the seagoing vessels mainly because of the lower cost (64%)

secondly because they can take their car with them (20%) and thirdly because the

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specific route suites their needs. A small percentage of them (6%) pointed out

fear for the airplane as the main reason for not using air transport (Table 4).

As for passengers using the airplane, the big majority of them (60%) prefers air

transport mainly because is less time consuming in comparison with the sea

vessel. The second reason is the route the vessel follows (22%) and then comes

the quality (11%), the fear for sea traveling (9%) and the cost (3%) (Table 5).

Table 4: Reasons for using seagoing vessels and not the airplane

Sex Cost Fear Car need Quality Route

Athens - Mytilini Male 20 2 0 0 1

Female 6 1 2 0 0

Total 26 3 2 0 1

Athens - Rhodes Male 15 1 9 0 0

Female 0 2 3 0 4

Total 15 3 12 0 4

Athens - Heraclion Male 17 0 2 0 3

Female 6 0 4 0 2

Total 23 0 6 0 5

Total 64 6 20 0 10

Table 5: Reasons for using the airplane and not the seagoing vessels

Sex Cost Fear Time Quality Route

Athens - Mytilini Male 0 5 10 1 4

Female 1 2 8 2 2

Total 1 7 18 3 6

Athens - Rhodes Male 0 1 11 2 6

Female 2 0 7 2 3

Total 2 1 18 4 9

Athens - Heraclion Male 0 1 18 3 5

Female 0 0 6 1 2

Total 0 1 24 4 7

Total 3 9 60 11 22

It is therefore concluded that cost and time are the two main factors that

passengers take into account when traveling. Air passengers consider time as the

most important demand factor while sea travelers consider cost when choosing

their transport mode.

Their preference can be quite justified if we consider the following two tables

showing the elements of time and cost for both transport modes as of February


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Table 7: Cost and travelling time by sea and air transport

Sea transport Travel Time Cost (in GDR)

Economy Class Cabin

Athens - Mytilini 13h 5.500 8.200 - 13.600

Athens - Rhodos 15h 7.000 10.500 - 20.700

Ath. - Heracleon 10 to 13h 5.300 10.000 - 15.000

Air transport Travel Time Cost (in GDR)

One way Return ticket

Athens - Mytilini 45' 13.700 27.400

Athens - Rhodos 55' 21.500 43.000

Ath. - Heracleon 50' 18.500 37.000

Source: Ministry of Merchant Marine

Moreover, as to whether passengers would prefer the other mode of transport if

there were reductions in its cost, sea travelers were in favor of the idea of a

cheaper airfare, while air travelers showed little interest in lower sea fare. More

specifically, 76% of sea travelers would choose the airplane it was cheaper while

only 31% of air travelers would chose the ship.

4. Implications for air carriers

The survey showed that there is not substantial competition between the two

modes mainly because passengers have different perceptions, that mainly derive

from their income status. Those who value cost as the most important factor,

travel by sea and those who prefer quality in terms of time, prefer the airplane.

Thus there are certain differences in the profile of the passengers.

It is concluded that for an air carrier to attract customers, the notion of different

cost levels should be well considered, while forming the appropriate pricing

policy. Since there are customers with different elasticity of demand there should

be a policy that would attract new customers from the sea transport area and also

consider the so called "producer surplus", i.e not lose income from those who can

pay higher fares. Price discrimination policy [9] is the one that could be applied,

that includes different pricing levels according to the elasticity of demand.

Such a policy is of great importance today due to the changes in the coastal

shipping organization. More specifically, in view of the liberalization of the

coastal shipping market (cabotage) in November 2002 and the upcoming internal

competition, maritime companies are already introducing new quality standards

in the market. The main breakthrough, is the building of new high speed vessels,

in order to satisfy the demand for low travelling time in a competitive price [10].

The new status in coastal shipping will affect the existing relationship between

the two markets. Questions therefore rise and thoughts for the developing of a

competitive relation between the modes in the insular market of Greece and the

way it will affect the decision making process in the air sector. The airplane is

loosing its eminence in terms of travelling time and now has to compete with the

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ship in terms of price. It is therefore essential now and mainly after the

liberalization of the coastal shipping market for the operator to adjust his

operational policy according to the level of competition with sea transport.

5. Conclusion

The liberalization of coastal shipping market is expected to affect radically the

operation of the whole system, since price, routes and entering in the market will

be subject to free competition. Apart from the changes in the maritime system

itself, a new era will commence also for the high cost air transport sector. The

intense internal competition between maritime companies has already shifted

competition to quality with emphasis on the travelling time, through the

introduction of high speed vessels. Therefore the predominance of air transport

in terms of travelling time is now under consideration. The non competitive but

rather complementary traditional relation between sea and air transport has

already started to change since both modes are now competing on time and price

as well. This situation will be more apparent in the after - cabotage years and will

have a great effect on the operation of air carriers.


[1] Gamaletsos Th. Theoretical Economics, Vol. B', 3rd Edition, Stamoulis, pp.

136, 1992 (in Greek)

[2] Ibid. pp 138

[3] Sambracos E., Gatzoli A. Quality characteristics of passenger coastal

transport. Essays in honor of late Prof. B.N Metaxas, pp.193-206, 1997 (in


[4] Goulielmos A. Greek coastal passenger shipping in front of liberalization,

International Journal of Transport Economics, Vol XXV - No 1, pp. 69-88, 1998

[5] Sambracos E., Gatzoli A., The coastal shipping problem and the

consequences from the competitivenes between modes, 2nd One Day Conference

on Transport Economics "Maritime Transport and Air Transport:

Competitiveness and Complementarity", University of Piraeus, pp 103-118, 1996

[6] Basdani H. Coastal Shipping Transport and tpurist development of small

islands 3rd One Day Conference in Transport Economics: Transport and Tourism,

University of Piraeus, pp.35-49, 1999 (in Greek)

[7] Sambracos E. Introduction in Transport Economics 2nd Edition, Stamoulis,

pp. 61-71, 2001 (in Greek)

[8] Kokolia E. Air and sea transport service in the Greek insular Market,

University of Piraeus, Department of Maritime Studies, Bachelor Essay, 2000

[9] Sambracos E. Introduction in Transport Economics 2nd Edition, Stamoulis,

pp. 156-159, 2001 (in Greek)

[10] Goulielmos A. The economic process of the Greek Coastal Shipping

transition (1997-2003) 2nd One Day Conference on Transport Economics

"Maritime Transport and Air Transport: Competitiveness and Complementarity",

University of Piraeus, pp 28-52, 1996 (in Greek)

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