Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ

Caves, Douglas W.; Christensen, Laurits R.; Tretheway, Michael W.

doi:10.2307/2555519

Cited by 593 publications

(240 citation statements)

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“…8 The technology of the air travel industry involves economies of scale, but increasing returns are exhausted at relatively low levels of output. Research on the economics of air transportation has shown that these economies do not hinder competition within routes (White, 1979;Caves et al, 1984;Liu and Lynk, 1999). Furthermore, when airlines have free access to airports, they can exert potential competition on each other's routes because reallocating existing equipment (aircraft) and personnel (flying crew) to new destinations is relatively easy.…”

Section: Introductionmentioning

confidence: 99%

Regulation, market structure and performance in air passenger transportation

Gönenç

Nicoletti

2003

OECD Economic Studies

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The paper uses a data base on regulation, market structure and performance in the air passenger transportation industry, to analyse the links among liberalisation, private ownership, competition, efficiency and airfares at national and route levels. Covering the 1996-97 travel season, 21 aggregate indicators have been developed for 27 OECD countries, and 23 micro indicators for 102 air routes connecting 14 major international airports. These data are summarised by means of factor analysis. Controlling for market size, network length and other technological and economic differences, and combining national and route-level characteristics, cross-country and cross-route regressions show that i) productive efficiency increases and fares decline when regulations and market structures become more friendly to competition; ii) productive efficiency is sensitive to actual competitive pressures, as proxied by market concentration; iii) fares react to liberalisation independently from market structure, but in liberal environments their decline is amplified by actual competition between carriers; iv) business and economy fares tend to decline when they are liberalised and market concentration is reduced, but tend to increase when markets are dominated by airline alliances on the route; v) discount fares are affected by the overall market environment at route ends, charter regulations and the actual presence of challenger airlines on the route; and vi) airport congestion and dominance tend to increase fares in time-sensitive market segments.

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Section: Introductionmentioning

confidence: 99%

Regulation, market structure and performance in air passenger transportation

Gönenç

Nicoletti

2003

OECD Economic Studies

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“…Other researchers (Caves et al, 1984) have found that cost savings associated with economies of network and link density can be captured in such situations. Because aItiance carriers engage in external growth, traffic volume increases are not offset by network growth and thus directly lead to higher traffic densities.…”

Section: Conclasionsmentioning

confidence: 96%

Consequences of strategic alliances between international airlines: The case of Swissair and SAS

Youssef

Hansen

1994

Transportation Research Part A: Policy and Practice

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“…Available estimates are dated. Caves et al (1984) suggested that a 10% increase in load factor decreases the airline's total cost by about 2.5%: if an alliance increases its load factor from 70 to 90%, this would decrease the total cost by about 7%). Brueckner and Spiller (1994) suggest a 3.75% decrease in marginal cost per 10% increase in load factor.…”

Section: Efficiencymentioning

confidence: 99%

Airline Partnerships, Antitrust Immunity, and Joint Ventures: What We Know and What I Think We Would Like to Know

Bilotkach

2018

Rev Ind Organ

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This paper offers an overview of the state of research on airline partnerships and related issues: antitrust immunity, and joint ventures. While at a high level the potential pro-and anti-competitive effects of various forms of airline partnerships are well understood; a number of important gaps in our knowledge remain. For instance, academic research has yet to develop a clear way to differentiate between codesharing with and without immunity, and joint ventures with the use of the conventional IO modelling apparatus. Developing such theoretical models can be useful for policy makers. Future empirical research should focus on understanding the effects of joint ventures-as well as evaluating efficiency benefits of airline partnerships-and determining whether multimarket contact and repeated interaction could have led to the competitive environment that is conducive to tacit collusion.

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Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ

Cited by 593 publications

References 0 publications

Regulation, market structure and performance in air passenger transportation

Regulation, market structure and performance in air passenger transportation

Consequences of strategic alliances between international airlines: The case of Swissair and SAS

Airline Partnerships, Antitrust Immunity, and Joint Ventures: What We Know and What I Think We Would Like to Know

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