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Price rivalry in airline markets: a study of a successful strategy of a network carrier against a low-cost carrier

Xavier Fageda, Juan Jiménez González () and Jordi Perdiguero ()

Journal of Transport Geography, 2011, vol. 19, issue 4, 658-669

Abstract: In the post-liberalization period, competition has increased in airline markets. 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 on less dense routes and shorter routes.

Keywords: Airlines; Competition; Low-cost carriers (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jotrge:v:19:y:2011:i:4:p:658-669

DOI: 10.1016/j.jtrangeo.2010.07.006

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