Prague Economic Papers 2017, 26(1):90-102 | DOI: 10.18267/j.pep.597

Determinants of Route Presence in the EU Airline Industry

Ivana Tománková
Faculty of Finance and Accounting, University of Economics in Prague, Prague, Czech Republic (xtomi00@vse.cz)

This paper investigates the determinants of airlines' route presence in the single EU aviation market by estimating two probit models - one for full-service airlines and one for low-cost carriers - which specify the presence (or absence) of an airline's service on the route as a function of its airport presence measures, the competition it faces from other airlines, and general route characteristics. The results point to the existence of dominant-firm advantages, domestic-firm privileges, and substantial airport-facilities-related barriers to entry in the EU airline industry. They further indicate that served routes are characterized by relative time efficiency of air travel (in comparison to car travel), large endpoint cities' populations as well as per capita GDPs; and that competitive effects between full-service and low-cost airlines are asymmetric.

Keywords: route presence, airline industry, air routes, airlines
JEL classification: L93, R49

Prepublished online: July 13, 2016; Published: February 1, 2017  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Tománková, I. (2017). Determinants of Route Presence in the EU Airline Industry. Prague Economic Papers, 26(1), 90-102. doi: 10.18267/j.pep.597
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Alderighi, M. et al. (2004). The Entry of Low-Cost Airlines: Price Competition in the European Airline Market. Tinbergen Institute Discussion Paper No. TI 04-074/3. Go to original source...
    2. Berry, S. T. (1992). Estimation of a Model of Entry in the Airline Industry. Econometrica, 60(4), 889-917. Go to original source...
    3. Bilotkach, V., Lakew P. A. (2014). On Sources of Market Power in the Airline Industry: Panel Data Evidence from the US Airports. Transportation Research Part A: Policy and Practice, 59, 288-305. DOI: 10.1016/j.tra.2013.11.011. Go to original source...
    4. Borenstein, S. (1989). Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry. The RAND Journal of Economics, 20(3), 344. DOI: 10.2307/2555575. Go to original source...
    5. ___________ (1991). The Dominant-Firm Advantage in Multiproduct Industries: Evidence from the U.S. Airlines. The Quarterly Journal of Economics, 106(4), 1237-1266. DOI: 10.2307/2937963. Go to original source...
    6. Burghouwt, G. et al. (2015). EU Air Transport Liberalisation: Process, Impacts and Future Considerations. International Transport Forum Discussion Paper No. 2015-04.
    7. Ciliberto, F., Tamer, E. (2009). Market Structure and Multiple Equilibria in Airline Markets. Econometrica, 77(6), 1791-1828. DOI: 10.3982/ECTA5368. Go to original source...
    8. Fageda, X. (2014). What Hurts the Dominant Airlines at Hub Airports? Research Institute of Applied Economics Working Paper 2014/14. Go to original source...
    9. German Aerospace Center (2008). Airline Business Models. Köln: German Aerospace Center.
    10. Goolsbee, A., Syverson, S. (2008). How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines. The Quarterly Journal of Economics, 123(4), 1611-1633. DOI: 10.1162/qjec.2008.123.4.1611. Go to original source...
    11. Hernandez, M. A., Wiggins, S. N. (2014). Nonlinear Pricing Strategies and Competitive Conditions in the Airline Industry. Economic Inquiry, 52(2), 539-561. DOI: 10.1111/ecin.12045. Go to original source...
    12. Hüschelrath, K., Müller, K. (2011). Patterns and Effects of Entry in US Airline Markets. Centre for European Economic Research ZEW Discussion Papers No. 11-059.
    13. Snider, C., Williams, J. W. (2015). Barriers to Entry in the Airline Industry: A Multi-Dimensional Regression-Discontinuity Analysis of AIR-21. Review of Economics and Statistics, 97(5), 1002-1022. DOI: 10.1162/REST_a_00455. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content