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

Authors

  • Kathrin Müller,

    1. Competition and Regulation Research Group, ZEW Centre for European Economic Research, Mannheim, Germany
    2. MaCCI Mannheim Centre for Competition and Innovation, Mannheim, Germany
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  • Kai Hüschelrath,

    Corresponding author
    1. MaCCI Mannheim Centre for Competition and Innovation, Mannheim, Germany
    2. WHU Otto Beisheim School of Management, Vallendar, Germany
    • Competition and Regulation Research Group, ZEW Centre for European Economic Research, Mannheim, Germany
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  • Volodymyr Bilotkach

    1. Newcastle Business School, Northumbria University, Newcastle upon Tyne, UK
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Competition and Regulation Research Group, ZEW Centre for European Economic Research, PO Box 10 34 43, D-68034 Mannheim, Germany. E-mail: hueschelrath@zew.de

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.

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