A metric to assess the competitive position of airlines and airline groups in the intra-European air transport market

Abstract

A strong competitive position can not only be regarded as a key success factor for firms, but may also indicate market power. As with operators of other long-distance transport modes, like e.g. train or coach operators, assessing an airline's overall competitive position is not trivial: This is because airlines serve many different, direct and indirect origin-destination (OD) markets between which competition intensity can vary immensely. Hence, airline (or rather airline group) networks compete against each other, meaning that “typical”, e.g. HHI-based competition assessments at, e.g., the national, airport or direct route levels will not be sufficient to get a full picture. This paper presents a modelling approach for an indicator for the individual competitive positions (CP) of airlines and airline groups at the network level. An application to the intra-European market, based on OD data for 2015, indicates a quite comfortable competitive position for low cost carriers like Ryanair, WIZZ Air, FlyBE or Volotea, followed by the major airline groups (Lufthansa, Air France-KLM, IAG) which focus on hub and spoke networks along some low cost activities. The weakest CP's within our sample of the 30 largest European airlines and airline groups are calculated for leisure airlines like Monarch, which recently filed for bankruptcy.