An analysis of price competition and price wars in Australia's domestic airline market

Article

Ma, Wenliang, Wang, Qiang, Yang, Hangjun and Zhang, Yahua. 2019. "An analysis of price competition and price wars in Australia's domestic airline market." Transport Policy. 81, pp. 163-172. https://doi.org/10.1016/j.tranpol.2019.06.008
Article Title

An analysis of price competition and price wars in Australia's domestic airline market

ERA Journal ID40708
Article CategoryArticle
AuthorsMa, Wenliang (Author), Wang, Qiang (Author), Yang, Hangjun (Author) and Zhang, Yahua (Author)
Journal TitleTransport Policy
Journal Citation81, pp. 163-172
Number of Pages10
Year2019
PublisherElsevier
Place of PublicationUnited Kingdom
ISSN0967-070X
1879-310X
Digital Object Identifier (DOI)https://doi.org/10.1016/j.tranpol.2019.06.008
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S0967070X18302154#!
Abstract

Price cuts and price wars, a frequent phenomenon in Australia's domestic airline market that have been widely reported in the Australian news media, are documented in this research. This paper examines the determinants of price wars in Australia using monthly data from 72 airline routes for the period from January 2013 to August 2017. Our finding is consistent with the widely held view that an increase in the major airlines' capacity was a main cause of price cuts and price wars. Our research shows that price wars continued after Qantas announced that it would stop adding domestic capacity and give up defending its 65% market share policy in 2015. Indeed, Qantas' 65% market share commitment has led to fierce pricing competition and the occurrence of price wars. Multimarket contact promoted price wars in Australia's domestic airline market.

KeywordsPrice wars; Australian airline market; Multimarket contact; Full-service airlines; Low-cost carriers
ANZSRC Field of Research 2020350901. Air transportation and freight services
380109. Industry economics and industrial organisation
380117. Transport economics
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Byline AffiliationsCapital University of Economics and Business, China
University of International Business and Economics, China
School of Commerce
Institution of OriginUniversity of Southern Queensland
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