The impact of low cost airline entry on competition, network expansion, and stock valuations
We conduct event studies and statistical analysis to explore the impact of low cost carriersâ€™ entry on legacy airline stock prices. Oligopoly structures, entry barriers, and high fixed costs make the airline industry highly susceptible to competitive and network expansion impact of low cost airlinesâ€™ entry. Positive stock returns are observed, which we interpret as the spillover effects of network expansion. Thus, rising passenger traffic and improved connectivity increase the revenues of legacy airlines to sufficiently offset the low cost carriersâ€™ competitive threats.
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Volume (Year): 18 (2012)
Issue (Month): 1 ()
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