The impact of low cost airline entry on competition, network expansion, and stock valuations

Dominic Detzen, Pankaj Jain, Tanakorn Likitapiwat () and Rose M. Rubin

Journal of Air Transport Management, 2012, vol. 18, issue 1, 59-63

Abstract: We conduct event studies and statistical analysis to explore the impact of low cost carriers’ 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 airlines’ 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 carriers’ competitive threats.

Keywords: Low cost airlines; Airline competition; Spillover effects; Airline stock valuation (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:18:y:2012:i:1:p:59-63

DOI: 10.1016/j.jairtraman.2011.09.004

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