Análise dos Impactos de Choques em Preços de Combustível na Competição entre Empresas Aéreas

Cícero Rodrigues de Melo Filho, Davi Prado Novais Moura, Vander Mendes Lucas and Francisco Gildemir Ferreira da Silva

No 112/2024, Economics and Politics Working Paper Series from Economics and Politics Research Group (EPRG), University of Brasília

Abstract: This paper investigates the effects of exogenous cost shocks on the competition between Full Service Carriers (FSC) and Low Fare Carriers (LFC) in the airline industry. We develop an oligopoly model of airline competition with exogenous fuel costs and simulate increases in total costs. We apply the model to the case of the most important Brazilian domestic route, using airline/route -specific demand and costs data. The contribution of this paper relies on the empirical model of asymmetric economies of density for the competing business models applied to fuel cost shocks. Results show that LFC's Airlines suffer greater losses of markup and demand in comparison with their rival (FSC), however they also increase the price proportionally more than their rivals. We find that, on account of the airlines have similar sizes, less changes were observed which gives a more predictable environmental to consumers. The results are attenuated by higher economies of density, but amplified by higher price-elasticities of demand and lower economic growth.

Keywords: Airlines; Markups; Fuel cost pass-through; Oligopoly; Industrial Organization (search for similar items in EconPapers)
Date: 2024-08-21
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Persistent link: https://EconPapers.repec.org/RePEc:gvn:eprgwp:1122024

DOI: 10.5281/zenodo.23545297

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