Effect of long-haul low-cost carriers on North Atlantic air fares

Christian Soyk, Jürgen Ringbeck and Stefan Spinler

Transportation Research Part E: Logistics and Transportation Review, 2021, vol. 152, issue C

Abstract: Low-cost carriers (LCCs) of the long-haul type have gained momentum in the years pre-COVID19, and on North Atlantic routes in particular.Yet their market impact on fare levels has never been evaluated, and findings related to short- and medium-haul LCCs cannot be readily applied to the long-haul case.We assess the effect, on market fare levels, of a long-haul LCC presence by proposing a stylized analytical model for hypotheses development.Then, while running two-stage least-squares regressions with instrumental variables, we distinguish between fares for economy and business classes, based on an extensive multi-year sample of North Atlantic routes.We estimate that, ceteris paribus, the presence of an LCC is associated with a 11% to 18% reduction in long-haul fares for economy class and 2% to 6% for business class.These findings continue to be relevant post–COVID19, as point-to-point-focused LCCs pose an alternative to sub-scale hub networks, especially with more leisure-/touristic-focused demand scenarios.

Keywords: Commercial airlines; Long-haul carriers; Low-cost carriers; Pricing; North Atlantic fares; Service class (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1016/j.tre.2021.102415

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