TY - JOUR
T1 - The impact of low cost airline entry on competition, network expansion, and stock valuations
AU - Detzen, Dominic
AU - Jain, Pankaj K.
AU - Likitapiwat, Tanakorn
AU - Rubin, Rose M.
PY - 2012/1/1
Y1 - 2012/1/1
N2 - We conduct event studies and statistical analysis to explore the impact of low cost carriers' entry on legacy airline stock prices. Oligopoly structures, entry barriers, and high fixed costs make the airline industry highly susceptible to competitive and network expansion impact of low cost airlines' entry. Positive stock returns are observed, which we interpret as the spillover effects of network expansion. Thus, rising passenger traffic and improved connectivity increase the revenues of legacy airlines to sufficiently offset the low cost carriers' competitive threats.
AB - We conduct event studies and statistical analysis to explore the impact of low cost carriers' entry on legacy airline stock prices. Oligopoly structures, entry barriers, and high fixed costs make the airline industry highly susceptible to competitive and network expansion impact of low cost airlines' entry. Positive stock returns are observed, which we interpret as the spillover effects of network expansion. Thus, rising passenger traffic and improved connectivity increase the revenues of legacy airlines to sufficiently offset the low cost carriers' competitive threats.
KW - Airline competition
KW - Airline stock valuation
KW - Low cost airlines
KW - Spillover effects
UR - http://www.scopus.com/inward/record.url?scp=80054732386&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=80054732386&partnerID=8YFLogxK
U2 - 10.1016/j.jairtraman.2011.09.004
DO - 10.1016/j.jairtraman.2011.09.004
M3 - Article
AN - SCOPUS:80054732386
SN - 0969-6997
VL - 18
SP - 59
EP - 63
JO - Journal of Air Transport Management
JF - Journal of Air Transport Management
IS - 1
ER -