Price rivalry in airline markets: a study of a successful strategy of a network carrier against a low-cost carrier
AbstractCompetition in airline markets may be tough. In this context, network carriers have two alternative strategies to compete with low-cost carriers. First, they may establish a low-cost subsidiary. Second, they may try to reduce costs using the main brand. This paper examines a successful strategy of the first type implemented by Iberia in the Spanish domestic market. Our analysis of data and the estimation of a pricing equation show that Iberia has been able to charge lower prices than rivals with its low-cost subsidiary. The pricing policy of the Spanish network carrier has been particularly aggressive in less dense routes and shorter routes.
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Bibliographic InfoPaper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201007.
Length: 33 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Airlines; competition; low-cost carriers JEL classification:L13; L59; L71;
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- L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
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