Airline Market Research Articles

Internet penetration and airline pricing: Evidence from China

This paper investigates the impacts of increasing Internet penetration on airfares and price dispersion in the Chinese airline market. It is found that an increase in Internet penetration is associated with higher average airfares and lower price dispersion between the major Chinese carriers. It appears that the increase in Internet penetration seems to have strengthened the major airlines’ ability to maintain price stability, which is an indication of the existence mutual forbearance among the major carriers confirmed in other studies. Higher prices and lower price dispersion are mostly to occur in the most heavily markets. This research also finds that if carriers possess similar degree of market power, the price dispersion between the airline pair is smaller. The findings can generate important policy insights, and inform anti-trust policies in the post-Covid period, when more consumers use Internet for search and inquiries, and when big data and artificial intelligence technologies mature.

The structural relationship between a low-cost carrier’s service experience, corporate social responsibility, brand love, and reuse intention: The case of Southwest Airlines

The purpose of the study is to demonstrate the structural associations between service quality, corporate social responsibility, brand love, and reuse intention in the context of a low-cost carrier (LCC). In addition, the relationship between the airlines’ CSR attributes and the above post-behavioral intentions was examined. Southwest Airlines was selected as the study subject because it has a high market share in the U.S. low-cost airline market. Amazon Mechanical Turk was used to recruit the survey participants, and 424 valid observations were ultimately used for data analysis. The results demonstrated that service experience positively affects both brand love and reuse intention. Furthermore, environmental CSR positively impacts brand love for Southwest Airlines. Finally, brand love is positively associated with reuse intention. These results could provide meaningful implications for LCC management.

Competition on the UK-Australasia market: Evidence from transaction data

Using the sample of actual purchased tickets, obtained from Skyscanner, we estimate the relationship between market concentration and airfares on a sample of the UK-Asia and UK-Australasia markets. We find significant positive relationship between market concentration and price. Moreover, the magnitude of the effect is similar to what has been reported in the literature for markets in other parts of the world. The relationship between the airline's market share and price suggests that the markets we are studying are subject to more intense competition as compared to what has been reported in the literature for more mature airline markets.

‘Wild Your weekends' promotion and its effect on traffic recovery during COVID-19 pandemic

China Eastern Airlines launched a ‘Wild Your Weekends' programme offering buyers an unlimited number of free trips during weekends, which is unprecedented in the Chinese airline market and also rare around the world. However, it is unclear whether such a promotion is effective in improving airlines’ liquidity. This study adopts the difference-in-differences (DID) method to empirically examine the impacts of this promotion programme on traffic volumes, ticket prices and revenues of China Eastern and its competitors. Our estimations suggest that this programme has overall helped China Eastern improve its liquidity. On one hand, the carrier was forced to lower prices on weekends, probably because passengers formed strong beliefs on China Eastern’s low price due to its promotion programme, and felt psychologically unfair by paying high prices as compared to the programme’s users. This decreased China Eastern’s revenue from non-programme passengers on weekends.

The impact of the COVID-19 crisis on the US airline market: Are current business models equipped for upcoming changes in the air transport sector?

We address the impact of the COVID-19 crisis on the US airlines market and discuss the benefits and limitations of current business models in a context of increasing socio-economic uncertainty and stringent environmental regulations. Drawing our data from the Bureau of Transportation Statistics and 10-K/A reports, we undertook an exploratory study of the performance of the 10 main passenger airlines in their domestic operation during one year. We found that, although major losses occurred industry-wide, ultra-low-cost and low-cost airlines fared better than full-service network carriers did in terms of financial performance. We argue, nevertheless, that such apparently successful business models are not necessarily adaptive to address future industry changes.

Dynamic Price Competition: Theory and Evidence from Airline Markets

Dynamic Price Competition: Theory and Evidence from Airline Markets

Dynamic Price Competition: Theory and Evidence from Airline Markets

Dynamic Price Competition: Theory and Evidence from Airline Markets

The Welfare Effects of Dynamic Pricing: Evidence From Airline Markets

Airfares fluctuate due to demand shocks and intertemporal variation in willingness to pay. I estimate a model of dynamic airline pricing accounting for both sources of price adjustments using flight‐level data. I use the model estimates to evaluate the welfare effects of dynamic airline pricing. Relative to uniform pricing, dynamic pricing benefits early‐arriving, leisure consumers at the expense of late‐arriving, business travelers. Although dynamic pricing ensures seat availability for business travelers, these consumers are then charged higher prices. When aggregated over markets, welfare is higher under dynamic pricing than under uniform pricing. The direction of the welfare effect at the market level depends on whether dynamic price adjustments are mainly driven by demand shocks or by changes in the overall demand elasticity.

Consequences of Dynamic Pricing in Competitive Airline Markets

Consequences of Dynamic Pricing in Competitive Airline Markets

Ryanair market strategies to assert dominance in the European low-cost airline market?

The European minimal expense transporters have delighted in sensational development lately and have significantly modified the organization of short-pull air administrations gave. Interest for minimal expense administrations has demonstrated more unstable than in the US, nonetheless, and there are beginning signs that the transporters' capacity to animate traffic is decreasing. Numerous new contestants have gotten on board with that temporary fad, and the conventional aircrafts have begun to retaliate. An examination of various courses from London shows that the minimal expense transporters have been significantly more fruitful in certain business sectors than others. The significant aircrafts stay predominant in areas including their primary centre air terminals though flimsy courses inside northern Europe have shown little development from minimal expense transporter section, some leftover the safeguard of territorial transporters. The minimal expense aircrafts have performed best on thick courses not including significant air terminals and relaxation courses among northern and southern Europe. Serious procedures that are inspected incorporate the capacity of minimal expense aircrafts to draw in rush hour gridlock to optional and provincial air terminals that were beforehand underutilized. It is shown that on certain courses from significant urban communities, optional air terminals are currently dealing with a greater part of the neighbourhood travellers. Notwithstanding, the capacity of air terminals to develop past the traffic capability of their own nearby catchment region decreases as additional areas gain minimal expense administration. Albeit a few undiscovered open doors might stay in nations like France and for administrations with more modest airplane, new courses are having a tendency to weaken existing interest. The centre is consequently prone to go to more straight on contest in the denser business sectors.

Search and Compare Drives Satisfaction

Ability to easily search and then compare items is an advantage that online platforms have over bricks and mortar formats. In such an intensely competitive airline market, this paper investigates if this exploration experience satisfies the traveler during air ticket booking, by applying the stimulus organism response model. An empirical study is used to test the proposed model by applying the structural equation modeling and interaction effects. The model describes the extent by which traveler’s repurchase intention is influenced by four important factors – search and compare assortment satisfaction, social influence and overall satisfaction. The paper extends the satisfaction to online repatronage intention and customer loyalty. This empirical study also establishes that the relationships are moderated due to civil status and ticketing number of platforms used by the customers.

How do global airline alliances affect flight frequency? Evidence from Russia

This paper analyzes the effects on flight frequency of two alliances that came about in the Russian airline market in recent years: between Aeroflot and SkyTeam in 2006, and between S7 and oneworld in 2010. We use a difference-in-differences (DID) model to identify the effects of these alliances on flight frequencies. The integration of S7 into oneworld provides evidence that the alliance resulted in reduced flight frequencies on routes where S7 overlapped with its new partners, but that it resulted in increased frequencies on routes where there was no overlap, especially in the case of so-called thin routes. Regarding the integration of Aeroflot into SkyTeam, we find that the alliance led to increased flight frequencies on routes where Aeroflot and its new partners had previously been competing. The fact that Aeroflot is a state-owned airline with a strong position in the Russian market might explain this expansion after the alliance. We also find that the alliance increased the frequencies on thin routes where there was no overlap.

Data Analytics for Air Travel Data: A Survey and New Perspectives

From the start, the airline industry has remarkably connected countries all over the world through rapid long-distance transportation, helping people overcome geographic barriers. Consequently, this has ushered in substantial economic growth, both nationally and internationally. The airline industry produces vast amounts of data, capturing a diverse set of information about their operations, including data related to passengers, freight, flights, and much more. Analyzing air travel data can advance the understanding of airline market dynamics, allowing companies to provide customized, efficient, and safe transportation services. Due to big data challenges in such a complex environment, the benefits of drawing insights from the air travel data in the airline industry have not yet been fully explored. This article aims to survey various components and corresponding proposed data analysis methodologies that have been identified as essential to the inner workings of the airline industry. We introduce existing data sources commonly used in the papers surveyed and summarize their availability. Finally, we discuss several potential research directions to better harness airline data in the future. We anticipate this study to be used as a comprehensive reference for both members of the airline industry and academic scholars with an interest in airline research.

Market Structure and Competition in Airline Markets

We provide an econometric framework for estimating a game of simultaneous entry and pricing decisions while allowing for correlations between unobserved cost and demand shocks. We use our framework to account for selection in the pricing stage. We estimate the model using data from the US airline industry and find that not accounting for endogenous entry leads to biased estimation of demand elasticities. We simulate a merger between American and US Airways and find that product repositioning and postmerger outcomes depend on how we model the characteristics of the merged firm as a function of the premerger firms’ characteristics.

Reconfiguring Aviation for a Climate-Safe Future: Are Airlines Sending the Wrong Message?

Aviation remains a problematic sector of the global economy in times of climate emergency. Grounded in the ideology of reconfiguration, we adopt a system transitions perspective to address high emissions leisure travel. Our focus falls on the marketing communications of airlines as a critical component in the prevailing sociotechnical regime. Thematic analysis of the e-mail marketing communications of selected airlines revealed three prominent tropes: adventure and discovery; privilege; and urgency. These communications bring air travel into the everyday lives of consumers and accelerate the turnover time of tourist consumption. Time is mobilized to create a sense of resource scarcity and urgency to consume, paradoxically in a situation characterized by oversupply. The COVID-19 pandemic has presented a unique opportunity for structural reform of the airline industry. Component substitution to address airline marketing is required as an important step toward overcoming consumer moral disengagement and reconfiguring the airline industry.

Impact of COVID-19 on different business models of European airlines

ABSTRACT In addition to social damage, the first wave of the COVID-19 pandemic also caused huge economic losses in the beginning of 2020, especially for companies in the tourism sector. The airline market was no exception. This study examines the significance of the business model of European listed airlines – low cost carriers (LCCs), full service carriers (FSCs) – for stock market performance. We use event study on the 11 airlines included in the sample. In terms of cumulative average abnormal returns, i.e. the most significant deviations from expected returns, negative phases can be detected in the entire and third stage of the pandemic. FSCs performed significantly better than LCCs at the time of the pandemic on 24 February, when European stock markets suffered the most damage; the business model overwrote financial indicators during the toughest period of the crisis. Although most LCCs had higher cash/assets ratios, they still produced worse results than the average performance of companies with lower cash/assets ratios. This analysis helps to ensure that, in addition to examining financial indicators, the enumeration of the business model in this industry can also be decisive. The future possibilities of the research are discussed at the end of the study.

The impact of COVID-19 on airline passenger travel behavior: An exploratory analysis on the Chinese aviation market

China was the first airline market in the world to be hit hard by the COVID-19 pandemic. It has been gradually recovering as the pandemic is largely contained domestically. However, with the global pandemic spread and great uncertainty, there has been a remarkable change in airline passengers’ travel behavior. This paper collected air passenger-level data from TravelSky in the Chinese market. In addition to the analyses on aggregate passenger flow patterns, this paper explores changes in airline passenger travel behavior, such as ticket booking time, age distribution of passengers, refunds and ticket changes, and passenger arrival time at airports. This is one of the first studies to focus on micro-level changes in airline passenger travel behavior by using objective passenger-level data. The pandemic-induced psychological changes in air travelers are explored, providing useful managerial and policymaking implications for the normalization of the pandemic and the recovery of the airline market in the post-pandemic era.

Non-Cooperative Game Theory in Measuring Strategic Interactions between Airline Joint-Venture Alliances

Purpose: The paper proposes a research method for measuring strategic interactions between airline joint-venture alliances that compete with each other. Design/Methodology/Approach: The proposed method is based on the non-cooperative game theory with a Nash-Cournot equilibrium. It consists in the development of a model that compares economic performance of airline long-haul, intercontinental operations in two consecutive scenarios, before and after joining an alliance. Findings: A model of strategic interactions between airline joint-venture alliances can be successfully based on the logic of the Nash-Cournot equilibrium. Furthermore, the game theory is an effective tool for analysing economic performance of airline joint business agreements. Practical Implications: The method can be used in measuring bottom line performance of long-haul airline joint business agreements world-wide. For example, on the EU–US airline market, the method can be used in the analysis of the following alliances: United Airlines – Lufthansa Group; American Airlines – International Airlines Group – Finnair; Delta Air Lines – Air France KLM – Virgin Atlantic. Originality/Value: This is a novel approach to research of advanced airline alliance strategies.

The Impact of Globalization on European Airline Market

Airline industry is very important for modern society as the biggest player in the globalization process by connecting regions, promoting global trade and tourism, facilitating economic and social development. However, here is a lack of research on relationship between globalization and airline industry in Europe. It remains unclear how to measure the impact of globalization on performance of airline companies and industry. The article aims at investigation of the impact of globalization on operational and financial performance of European airlines before pandemics.The authors applied a nonexperimental quantitative research design to analyze the relationship between independent globalization variables (level of globalization in Europe, globalization opportunity, globalization threat) and dependent airlines’ operational and financial performance indicators. Research is done using secondary data from annual reports of 19 European airlines members of European Common Aviation Area (ECAA). The panel data analysis was applied for 2007–2017 with multiple regression analysis using STATA. The results show that globalization exerts a significant positive effect on operational performance. On financial performance only revenue per passenger kilometers is positively influenced by globalization. Globalization affects low-cost airlines and full-service airlines performance differently.

Hub airport slot Re-allocation and subsidy policy to speed up air traffic recovery amid COVID-19 pandemic --- case on the Chinese airline market

With international air travels largely banned around the world amid the global COVID-19 pandemic, many gateway and hub airports have more ideal slots available for reallocation. Airport traffic recovery replaces airport congestion to become the primary challenge of major airports around the world. With the pandemic well controlled domestically in China, the government liberalizes the hub airport slots for those previously forbidden services to the small/regional airports. This paper thus analytically examines the effect of this slot liberalization. The government subsidy to the small airports has also been considered. It is found that the slot liberalization can speed up airport traffic recovery for both hub and small airports. The hub airport slot liberalization leads to a lower level of minimum subsidy to sustain the survival of the small airports. Given any fixed level of subsidy to the small airport, both the total airport traffic and social welfare would improve with the slot liberalization at the hub airport. When the government can adjust the level of subsidy after liberalizing the hub airport slots, the subsidy could be excessive, if the government emphasizes too much on airport traffic recovery. This would, however, harm the overall social welfare.