The Remains of Regulation: Airlines Profits After Liberalization

Pedro L Marin

STICERD - Economics of Industry Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper develops an empirical model of entry to analyze the effect of previous regulation on European airlines? post-liberalization profits. The author distinguishes between European flag carriers, which are hightly regulated at the beginning of the eighties, and independent airlines. It is found that the latter enjoy sunk cost advantages but get lower variable profits than the former. This means that possible efficiency disadvantages suffered by the flag carriers are more than offset by their higher perceived quality, leading to a situation in which they are less likely to enter a route, but also less likely to exit.

Keywords: Airlines; profits; entry; deregulation. (search for similar items in EconPapers)
Date: 1995-12
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stieip:12

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