Entry pattern of low-cost carriers in New Zealand – The impact of domestic and trans-Tasman market

Article

Wang, Kun, Tsui, Wai Hong Kan, Li, Lan-Bing, Lei, Zheng and Fu, Xiaowen. 2020. "Entry pattern of low-cost carriers in New Zealand – The impact of domestic and trans-Tasman market." Transport Policy. 93, pp. 36-45. https://doi.org/10.1016/j.tranpol.2020.04.020
Article Title

Entry pattern of low-cost carriers in New Zealand – The impact of domestic and trans-Tasman market

ERA Journal ID40708
Article CategoryArticle
AuthorsWang, Kun, Tsui, Wai Hong Kan, Li, Lan-Bing, Lei, Zheng and Fu, Xiaowen
Journal TitleTransport Policy
Journal Citation93, pp. 36-45
Number of Pages10
Year2020
PublisherElsevier
Place of PublicationUnited Kingdom
ISSN0967-070X
1879-310X
Digital Object Identifier (DOI)https://doi.org/10.1016/j.tranpol.2020.04.020
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S0967070X20301517
Abstract

This study empirically examines the route entry decision of Jetstar NZ, a low-cost carrier (LCC), in New Zealand's duopolistic domestic aviation market between 2010 and 2016. The estimation controls for route characteristics, airline spatial network, and airline competition variables in both New Zealand's domestic market and the adjacent trans-Tasman markets linking Australia and New Zealand. The empirical results suggest that the favorable regional socioeconomic and tourism factors helped Jetstar NZ launch its service into a route. The LCC's entry decisions on domestic routes are not sensitive to airline competition within the same market but are influenced by the carrier's own operation and airline competition in the international Tasman market. Our study suggests that there are different sources of network effects for LCCs operating point-to-point travel demands. The "airline-in-airline" (AinA) strategy allows airlines (Jetstar and Qantas) within the same group to achieve certain synergy and competition benefits, but certain network effects can only be obtained between the same types of carriers. We also find preliminary evidence of spill-over effects, through which international liberalization influences competition in the domestic market.

KeywordsLCC'S route entry decision; Route- and market-pair characteristics ; Airline spatial network ; Airline competition; Policy implication
Contains Sensitive ContentDoes not contain sensitive content
ANZSRC Field of Research 2020380202. Econometric and statistical methods
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Byline AffiliationsUniversity of International Business and Economics, China
Massey University, New Zealand
Nankai University, China
Swinburne University of Technology
Hong Kong Polytechnic University, China
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