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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 ()

No 201007, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Competition in airline markets may be tough. 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 in less dense routes and shorter routes.

Keywords: Airlines; competition; low-cost carriers JEL classification:L13; L59; L71 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-03, Revised 2010-03
New Economics Papers: this item is included in nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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