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Airline delays, congestion internalization and non-price spillover effects of low cost carrier entry

Author

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  • Bendinelli, William E.
  • Bettini, Humberto F.A.J.
  • Oliveira, Alessandro V.M.

Abstract

This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes.

Suggested Citation

  • Bendinelli, William E. & Bettini, Humberto F.A.J. & Oliveira, Alessandro V.M., 2016. "Airline delays, congestion internalization and non-price spillover effects of low cost carrier entry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 85(C), pages 39-52.
    • Handle: RePEc:eee:transa:v:85:y:2016:i:c:p:39-52
    DOI: 10.1016/j.tra.2016.01.001
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    19. Varella, Rafael R. & Frazão, Jessica & Oliveira, Alessandro V.M., 2017. "Dynamic pricing and market segmentation responses to low-cost carrier entry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 151-170.
    20. Lange, Anne & Sieling, Julian & Gonzalez Parra, Garoe, 2019. "Convergence in airline operations: The case of ground times," Journal of Air Transport Management, Elsevier, vol. 77(C), pages 39-45.
    21. de Oliveira, Renan P. & Oliveira, Alessandro V.M., 2021. "Financial distress, survival network design strategies, and airline pricing: An event study of a merger between a bankrupt FSC and an LCC in Brazil," Journal of Air Transport Management, Elsevier, vol. 92(C).
    22. Altringer, Levi & Zahran, Sammy & Shwiff, Stephanie A. & Begier, Michael J. & Anderson, Aaron, 2022. "Spillover delay effects of damaging wildlife strike events at U.S. airports," Economics of Transportation, Elsevier, vol. 30(C).
    23. Calzada, Joan & Fageda, Xavier, 2023. "Airport dominance, route network design and flight delays," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 170(C).
    24. Miranda, Victor A.P. & Oliveira, Alessandro V.M., 2018. "Airport slots and the internalization of congestion by airlines: An empirical model of integrated flight disruption management in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 201-219.
    25. Suau-Sanchez, Pere & Voltes-Dorta, Augusto & Cugueró-Escofet, Natàlia, 2020. "An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it?," Journal of Transport Geography, Elsevier, vol. 86(C).

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    More about this item

    Keywords

    Airports; Delays; Congestion; Low cost airlines; Endogeneity;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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