Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2004-07-02
Number: 04-074/3
Author-Name: Marco Alderighi
Author-Email: marco.alderighi@uni-bocconi.it
Author-Workplace-Name: CERTeT - Bocconi University, Milan
Author-Name: Alessandro Cento
Author-Email: alessandro.cento@klm.com
Author-Workplace-Name: KLM Royal Dutch Airlines, Revenue Management Dept, Milan
Author-Name: Peter Nijkamp
Author-Email: pnijkamp@feweb.vu.nl
Author-Workplace-Name: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Author-Name: Piet Rietveld
Author-Email: prietveld@feweb.vu.nl
Author-Workplace-Name: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Title: The Entry of Low-Cost Airlines: Price Competition in the European Airline Market
Abstract: This paper investigates the response of full service carriers (FSCs) to theentry of low-cost carriers (LCCs). We develop a model of airlinecompetition, which accommodates various market structures, some ofwhich include low-cost players. Using data on published airfares ofLufthansa, British Airways, Alitalia and KLM for the main city-pairs fromItaly to the rest of Europe, our statistical modelling resu1ts confirm theconclusions of the theoretical model. Competition among FSCs appears toaffect the price levels of business and leisure segments asymmetrically. Incontrast, competition with LCCs reduces the fares of FSCs in all classesproportionally.
Classification-JEL: D43; L15; L93
Keywords: Pricing strategies; yield management; low-cost carriers; European airline market
File-Url: https://papers.tinbergen.nl/04074.pdf
File-Format: application/pdf
File-Size: 461740 bytes
Handle: RePEc:tin:wpaper:20040074