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Impacts of entry in airline markets: effects of revenue management on traditional measures of airline performance

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  • Gorin, Thomas
  • Belobaba, Peter

Abstract

Assessment of unfair competitive practices in airline markets is typically based on the analysis of changes in aggregate measures of airline performance, such as average fares, traffic and revenues. Simulation results show that these measures can be greatly affected by the competitive revenue management situation. For example, average fares on the incumbent carrier can either increase or decrease following entry by a new competitor, depending on whether one or both airlines perform revenue management. Consequently, these measures on their own do not constitute a reliable indication of the response of incumbent carriers, and provide even less information on their strategic intent, which is critical in identifying predation.

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  • Gorin, Thomas & Belobaba, Peter, 2004. "Impacts of entry in airline markets: effects of revenue management on traditional measures of airline performance," Journal of Air Transport Management, Elsevier, vol. 10(4), pages 257-268.
    • Handle: RePEc:eee:jaitra:v:10:y:2004:i:4:p:257-268
    DOI: 10.1016/j.jairtraman.2004.03.002
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    References listed on IDEAS

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    1. Baumol, William J & Panzar, John C & Willig, Robert D, 1983. "Contestable Markets: An Uprising in the Theory of Industry Structure: Reply," American Economic Review, American Economic Association, vol. 73(3), pages 491-496, June.
    2. Morrison, Steven A & Winston, Clifford, 1990. "The Dynamics of Airline Pricing and Competition," American Economic Review, American Economic Association, vol. 80(2), pages 389-393, May.
    3. Hurdle, Gloria J, et al, 1989. "Concentration, Potential Entry, and Performance in the Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 119-139, December.
    4. Belobaba, Peter P. & Wilson, John L., 1997. "Impacts of yield management in competitive airline markets," Journal of Air Transport Management, Elsevier, vol. 3(1), pages 3-9.
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    Cited by:

    1. Cristina Barbot, 2006. "Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route," CEF.UP Working Papers 0602, Universidade do Porto, Faculdade de Economia do Porto.
    2. Lara Gitto & Fulvio Minervini, 2007. "The Performance of European Full Service Airlines after Liberalisation: An Econometric Analysis," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 105-122, January-F.
    3. Guillermo Gallego & Özge Şahin, 2010. "Revenue Management with Partially Refundable Fares," Operations Research, INFORMS, vol. 58(4-part-1), pages 817-833, August.
    4. Gorin, Thomas & Belobaba, Peter, 2008. "Assessing predation in airline markets with low-fare competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(5), pages 784-798, June.

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