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

Xavier Fageda*, Juan Luis Jiménez, Jordi Perdiguero

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

34 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)658-669
Number of pages12
JournalJournal of Transport Geography
Volume19
Issue number4
DOIs
Publication statusPublished - Jul 2011

Keywords

  • Airlines
  • Competition
  • Low-cost carriers

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