Pricing dynamics between airline groups with dual-brand services: the case of the Australian domestic market
Article
Article Title | Pricing dynamics between airline groups with dual-brand services: the case of the Australian domestic market |
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ERA Journal ID | 4298 |
Article Category | Article |
Authors | Zhang, Yahua (Author), Sampaio, Breno (Author), Fu, Xiaowen (Author) and Huang, Zhibin (Author) |
Journal Title | Transportation Research Part A: Policy and Practice |
Journal Citation | 112, pp. 46-59 |
Number of Pages | 14 |
Year | 2018 |
Publisher | Elsevier |
Place of Publication | United kingdom |
ISSN | 0191-2607 |
0965-8564 | |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.tra.2018.01.006 |
Web Address (URL) | https://www.sciencedirect.com/science/article/pii/S0965856418300211?via%3Dihub |
Abstract | The Australian aviation industry achieved substantial growth after the abolition of the 'two-airline-policy' in 1990. With Virgin’s purchase of Tiger Airways, a new duopoly between two airlines groups, each consisting of a full service airline (FSA) and a low cost carrier (LCC), emerged in the domestic market. In this study, we analyze the pricing dynamics among the four airlines of the duopoly groups, using panel data of online fares on the four most densely travelled routes in the domestic market. Our empirical results suggest that market segmentation allows the FSAs to charge significantly higher prices than the LCCs. Still, there is clear evidence of competition within and across the market segments, and the airlines’ pricing responses are asymmetric. Virgin’s price responses to Qantas and Jetstar are moderate. In comparison, more than one third of Qantas’s fare changes and less than half of Jetstar’s fare changes are in response to Virgin’s fare adjustments in the previous period. Despite Qantas and Jetstar’s large market share, after lengthy and costly price wars in previous years, the Qantas group still responds to Virgin as if competing with an entrant. All four carriers adopt revenue management practices, but the pricing of Qantas and Jetstar does not seem to be coordinated. Our study identifies a complex competition pattern between airline groups offering dual-brand services, and suggests that the Australian domestic market has not reached a stable equilibrium. |
Keywords | Australian domestic market; airline pricing; competition |
ANZSRC Field of Research 2020 | 350901. Air transportation and freight services |
380117. Transport economics | |
Public Notes | Files associated with this item cannot be displayed due to copyright restrictions. |
Byline Affiliations | School of Commerce |
Federal University of Pernambuco, Brazil | |
University of Sydney | |
Institution of Origin | University of Southern Queensland |
https://research.usq.edu.au/item/q4xqv/pricing-dynamics-between-airline-groups-with-dual-brand-services-the-case-of-the-australian-domestic-market
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