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The Construction of a Low Cost Airline Network

34 Pages Posted: 12 Aug 2011  

Kathrin Mueller

Centre for European Economic Research (ZEW)

Volodymyr Bilotkach

Newcastle Business School

Kai Hüschelrath

Centre for European Economic Research (ZEW)

Date Written: July 2011

Abstract

The paper investigates the construction of a low cost airline network by analyzing JetBlue Airways' entry decisions into nonstop domestic U.S. airport - pair markets between 2000 and 2009. Adopting duration models with time-varying covariates, we find that JetBlue consistently avoided concentrated airports and targeted concentrated routes; network economies also affected entry positively. For non-stop entry into a route that has not been served on a non-stop basis before, our analysis reveals that the carrier focused on thicker routes and secondary airports, thereby avoiding direct confrontation with network carriers. 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.

Keywords: Airline industry, network, entry, low cost carrier

JEL Classification: L11, L23, L93

Suggested Citation

Mueller, Kathrin and Bilotkach, Volodymyr and Hüschelrath, Kai, The Construction of a Low Cost Airline Network (July 2011). ZEW - Centre for European Economic Research Discussion Paper No. 11-052. Available at SSRN: https://ssrn.com/abstract=1908745 or http://dx.doi.org/10.2139/ssrn.1908745

Kathrin Mueller

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Volodymyr Bilotkach

Newcastle Business School ( email )

208, City Campus East-1
Newcastle upon-Tyne, NE1 8ST
United Kingdom

Kai Hüschelrath (Contact Author)

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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