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Effect of long-haul low-cost carriers on North Atlantic air fares

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  • Soyk, Christian
  • Ringbeck, Jürgen
  • Spinler, Stefan

Abstract

Low-cost carriers (LCCs) of the long-haul type have gained momentum in the years pre-COVID19, and on North Atlantic routes in particular.Yet their market impact on fare levels has never been evaluated, and findings related to short- and medium-haul LCCs cannot be readily applied to the long-haul case.We assess the effect, on market fare levels, of a long-haul LCC presence by proposing a stylized analytical model for hypotheses development.Then, while running two-stage least-squares regressions with instrumental variables, we distinguish between fares for economy and business classes, based on an extensive multi-year sample of North Atlantic routes.We estimate that, ceteris paribus, the presence of an LCC is associated with a 11% to 18% reduction in long-haul fares for economy class and 2% to 6% for business class.These findings continue to be relevant post–COVID19, as point-to-point-focused LCCs pose an alternative to sub-scale hub networks, especially with more leisure-/touristic-focused demand scenarios.

Suggested Citation

  • Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2021. "Effect of long-haul low-cost carriers on North Atlantic air fares," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:transe:v:152:y:2021:i:c:s1366554521001824
    DOI: 10.1016/j.tre.2021.102415
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