Does market exit of a network airline affect airline prices and frequencies on tourist routes?

Abstract

This paper examines the influence of network airline bankruptcy (and consequently its market exit) on prices and route frequencies. Specifically, the 2011 case of Spanair is analyzed, using Spanish route data for the period 2006–2013. The study finds that the Spanair bankruptcy led to a reduction in prices on those routes where its services were replaced by low-cost airlines. On the other hand, there was no evidence of any clear reduction in flight frequencies. Given that tourist passengers are particularly sensitive to prices, this paper provide evidence about the positive impact of low-cost airlines on tourism.