The Construction of a Low‐Cost Airline Network – Facing Competition and Exploring New Markets

Abstract

The paper investigates the construction of a low‐cost airline network by analyzing JetBlue Airways' entry decisions into non‐stop domestic US airport‐pair markets. Adopting duration models, we find that JetBlue consistently avoided concentrated airports and targeted concentrated routes; network economies also affected entry positively. For non‐stop entry into routes that have not been served directly before, our analysis reveals that the carrier focused on thicker routes and secondary airports. Non‐stop entry into existing non‐stop markets, however, shows that JetBlue concentrated on longer‐haul markets and avoided routes already operated by either other low‐cost carriers or network carriers under bankruptcy protection. Copyright © 2012 John Wiley & Sons, Ltd.

The impact of hub hierarchy and market competition on airfare pricing in US hub-to-hub markets

“…Moreover, recently launched LCCs tend to organize HS networks (e.g., Air Tran at Atlanta, Frontier at Denver and JetBlue at John F. Kennedy) (Reynolds-Feighan, 2001). It should be noted that their entry pattern (such as JetBlue) is still dominated by providing non-stop services, while opening new one-stop connections may be considered after non-stop entry (Müller et al, 2012). Meanwhile, FSCs have launched their own low-cost subsidiaries in response to the low-cost competition (e.g.…”

Borrowing Power from Potential Entrants and High-Speed Rail: Entry Pattern of China’s Low-Cost Carrier

“…Ultra-low-cost carriers have further challenged the standard LCC model with even lower costs/fares, more service unbundling and transitional route structures [21]. Furthermore, reflecting on LCCs worldwide, the business models of long-haul LCCs have been discussed at both domestic [22] and international levels [23][24][25][26]. Full-service airlines (FSCs) have also adopted the airline-within-airline (AWAs) model and have introduced their own low-cost airlines to enhance their competitiveness, such as Asiana Air [27].…”

A Network-Design Analysis of Airline Business Model Adaptation in the Face of Competition and Consolidation

“…The literature on airline decision-making concerning network design typically considers a set of route, airport, and demographic features that are possibly related to the attractiveness of entering a market (e.g., Boguslaski et al, 2004;Oliveira, 2008;Müller et al, 2012). These features include characteristics such as market density and distance; endpoint cities' characteristics such as population and income; proxies for network size, such as the number of destination cities served from each of the endpoint cities or the presence of a hub of the analyzed carrier on either of the endpoint cities; and also metrics of competition and dominance such as the market/airport/city level Herfindahl-Hirschman Index (HHI) of market concentration.…”