Low-cost carrier competition and airline service quality in Europe

Abstract

The authors are investigating whether a higher presence and more efficient operations of low-cost carriers (LCCs) can increase the service quality in terms of on-time performance of all the flights landing at an airport. We sample 100 European airports located in 76 metropolitan areas of diverse sizes in 19 countries on both a daily and flight-by-flight basis during the period from April 2011 to December 2012. We construct a panel dataset at the flight code level comprising about 3.5 million observations. We find that LCCs contribute to a reduction of delays for airlines and flights landing at the observed airport. From the customers’ point of view and taking into consideration the level of service, we conclude that the presence of LCCs represents a positive externality for an airport. Airport management may therefore consider the proactive increase of LCCs market share in their long-term business strategies.