Pricing and Performance in Monopoly Airline Markets

Peteraf, Margaret A.; Reed, Randal

doi:10.1086/467311

Cited by 35 publications

(16 citation statements)

References 20 publications

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“…As we can see, an average service in our sample features four daily ‡ights, with about half of the services operated more frequently than that. Over half of the markets in our sample are monopolies, which is not unusual for the non-stop routes in the US airline industry (see Peteraf and Reed, 1994). Furthermore, the routes tend to be highly concentrated, as illustrated by a mean HHI close to 0:90.…”

Section: Datamentioning

confidence: 82%

Airline consolidation and the distribution of traffic between primary and secondary hubs

Bilotkach

Fageda

Flores-Fillol

2013

Regional Science and Urban Economics

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Several airline consolidation events have recently been completed both in Europe and in the United States. The model we develop considers two airlines operating hub-and-spoke networks, using di¤erent hubs to connect the same spoke airports.We assume the airlines to be vertically di¤erentiated, which allows us to distinguish between primary and secondary hubs. We conclude that this di¤erentiation in air services becomes more accentuated after consolidation, with an increased number of ‡ights being channeled through the primary hub. However, congestion can act as a brake on the concentration of ‡ight frequency in the primary hub following consolidation. Our empirical application involves an analysis of Delta's network following its merger with Northwest. We …nd evidence consistent with an increase in the importance of Delta's primary hubs at the expense of its secondary airports. We also …nd some evidence suggesting that the carrier chooses to divert tra¢ c away from those hub airports that were more prone to delays prior to the merger, in particular New York's JFK airport.

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Section: Datamentioning

confidence: 82%

Airline consolidation and the distribution of traffic between primary and secondary hubs

Bilotkach

Fageda

Flores-Fillol

2013

Regional Science and Urban Economics

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“…The evolution of the U.S. airline industry, however, was dependent on investments besides those in airliners, and many of these investments involved large specialized assets. Examples of these include investments in central hub facilities, specialized baggage handling equipment, computerized reservation services, local advertising, and high-volume maintenance facilities (Peteraf, 1995;Peteraf & Reed, 1994). As the industry evolved in a "hub and spoke model" after deregulation in 1978, it was these latter sets of sunk investments that arguably drove the extensive M&A activity witnessed in the industry.…”

Section: An Industry Framework For Manda Versus Alliance Choicementioning

confidence: 99%

Industry Determinants of the “Merger Versus Alliance” Decision

Yin

Shanley

2008

AMR

152

109

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Mergers and acquisitions (M&As) and alliances are potential alternative choices for managers. We propose that three dimensions of industry conditions are likely to be influential in such choices: (1) industry demands on firms to make significant commitment, (2) the environmental pressures for flexibility, and (3) the limitations on firm choices stemming from industry concentration and institutional conditions. We develop propositions about how differences across these three dimensions influence the choices that firms make between M&As and alliances.

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“…Many studies examine profitability or load factors by airline route. Peteraf and Reed (1994), for example, look at the profitability of routes as a function of competitors and potential competitors on specific routes. They find that, in monopoly airline markets, the number and concentration of potential entrants have weaker effects on pricing than they do in more competitive markets.…”

Section: Prior Work On the Micro-structure Of Competitionmentioning

confidence: 99%

“…Two or three airlines can easily extract monopoly profits while operating from the same airport if they fly to different destinations. Airline competition analyses have examined such specific routes as the unit of analysis (Peteraf and Reed, 1994).…”

Section: Introductionmentioning

confidence: 99%

Why do gas prices vary, or towards understanding the micro‐structure of competition

2002

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Strategic management work on competition considers industry segments or industries for the most part. We argue that real competition occurs at much lower levels of aggregation in many industries: what we term the micro-structure of competition. Micro-structures arise from boundedly rational firms searching imperfectly for business opportunities and boundedly rational consumers searching in a behaviorally determined manner for products and services. This paper lays out the basics of the micro-structural approach to competitive analysis and presents initial propositions from that approach.

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Pricing and Performance in Monopoly Airline Markets

Cited by 35 publications

References 20 publications

Airline consolidation and the distribution of traffic between primary and secondary hubs

Airline consolidation and the distribution of traffic between primary and secondary hubs

Industry Determinants of the “Merger Versus Alliance” Decision

Why do gas prices vary, or towards understanding the micro‐structure of competition

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