Assessing low-fare entry in airline markets : impacts of revenue management and network flows

(cont.) the essential factors affecting traditional measures of airline performance following low-fare entry. Our simulation results show that these measures are greatly affected by the entrant's capacity relative to the incumbent, by the incumbent carrier's competitive pricing response, and by the competitive revenue management situation. For example, average fares on the incumbent carrier can either increase or decrease following entry by a new competitor, depending on whether one or both airlines perform revenue management. In an extension of the simulations to a larger network environment, it is also shown that network flows of passengers affect the performance of all competitors, as measured by aggregate measures of performance. Furthermore, use of advanced network revenue management allows the incumbent carriers to rely on connecting passengers to mitigate the effect of entry on network revenues, but leads to amplified effects at the local market level. Consequently, this research establishes that traditional aggregate measures of airline performance on their own do not constitute a reliable indication of the response of incumbent carriers, and provide even less information on their strategic intent, which is critical in identifying predation. This research also demonstrates the relationships between aggregate measures of performance and previously overlooked factors including relative entrant capacity, competitive pricing and revenue management, and flows of network passengers.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Aeronautics and Astronautics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2004

Author dc:creator

• Gorin, Thomas O. (Thomas Olivier), 1976-

Advisor dc:contributor.advisor

• Peter P. Belobaba.

• Aeronautics and Astronautics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/28911

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/28911