The pricing effects of entry by Hainan airlines: Evidence from the U.S.-China international air travel market

Abstract

This paper examines the impacts of entry by Hainan Airlines (HA) to the U.S.-China air travel market, using user-reported data from Travelsuperlink.com. The sample consists of 15,773 round-trip economy-class fares for 39 routes purchased between 2010 and 2016. Our analysis indicates that, compared to other routes, the average airfare of the routes where HA entry occurs increases by up to 3.4 %. We also find evidence that U.S. legacy carriers respond to HA entry by raising their ticket prices, while smaller rivals do not. These findings are consistent with “the displacement effect” documented in the literature.