Airline delays,congestion internalization and non-price spillover effects of low cost carrier entry |
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| Institution: | 1. Center for Transport Economics, Aeronautics Institute of Technology, Brazil;2. University of São Paulo, Brazil;1. Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hong Kong;2. Asia-Pacific School of Logistics, Inha University, Incheon, South Korea;3. Graduate School for International Development and Cooperation, Hiroshima University, Japan;4. Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada;5. China Academy of Financial Research, Shanghai Jiao Tong University, China;1. University of Cologne, Department of Corporate Development and Organization, Albertus-Magnus-Platz, 50923 Cologne, Germany;2. University of Southern Denmark, Department of Border Region Studies, Alsion 2, 6400 Sønderborg, Denmark;3. Massachusetts Institute of Technology, Laboratory for Aviation and the Environment, 77 Massachusetts Avenue, Cambridge, MA 02139, United States;1. University of Amsterdam, Amsterdam Business School, Plantage Muidergracht 12, 1018 TV Amsterdam, The Netherlands;2. SEO Economic Research, Roetersstraat 29, 1018 WB Amsterdam, The Netherlands |
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| Abstract: | This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes. |
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| Keywords: | Airports Delays Congestion Low cost airlines Endogeneity L93 C5 |
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