Network carriers' strategic decisions: does low cost carrier entry matter?

Abstract

Good decisions require that each decision-maker accurately predicts the strategic moves of the other parties. Dealing with prospective low-cost carrier (LCC) entrants is critical for global network airlines. This research focused on two main issues. First, it investigates competitive reaction by established US airlines when they face an LCC entrant in the less congested, small-sized US regional airports. Second, it examines which of the market indicators are most likely to influence airline fares out of small regional airports with the LCC entry. While the first stage of research demonstrated mixed results and did not discover any patterns in airline behaviour with LCC entry due to a large number of other variables influencing airline revenue management. The second stage confirmed that the stage length, number of passengers, number of competitors, number of stops and the oil price do have an impact on airfares.