The Shanghai–Beijing “Air Express” Service Model and its Impact on the Pricing Behaviour of Airlines

Abstract

Using departure day airfare data, this paper examines the pricing pattern on the Shanghai–Beijing route and reveals anti-competitive pricing behaviour following the introduction of the “Air Express” service. This new service adds limited value to passengers because of the airport facility constraints. Jointly providing the “express” service has provided a channel through which the three dominant players can communicate effectively to achieve more stable prices at a higher level. Interestingly, lower prices charged by the fringe airlines on this route were accommodated by the big ones. Meanwhile, the three dominant airlines did not exhibit any obvious deviation in pricing from each other.