Airline Price Competition-IJTE version.pdf (322.27 kB)
0/0

A time series analysis of the pricing behaviour of directly competitive 'low-cost' airlines

Download (322.27 kB)
journal contribution
posted on 25.02.2009 by David Pitfield
This paper, after providing an introduction to the operating context of low cost carriers in Europe, examines the competitive pricing behaviour of airlines. Data is collected by route for cases where more than one airline is in direct competition. Data on fares is obtained from the internet for two airlines with competing services to Alicante, Prague and Malaga, departing from Nottingham East Midlands Airport in the UK, for the six working weeks up to and including the actual departure. These destinations represent leisure traffic. Two domestic business destinations were also selected to illustrate price competition on business demand where departure times were within a maximum of 20 minutes of each other and a further examination of competing services from London Gatwick (LGW) was made. Cross Correlation Analysis is used to examine whether, subject to a variety of lags, the prices offered by one airline can be seen to be both correlated with the other price series and to lead it. This provides some insight into the pricing strategy adopted by the competitors. Autocorrelation Functions (ACFs) and Partial Autocorrelation Functions (PACFs) can also be produced on the prices offered by each airline. These suggest the nature of the ARIMA model that can be fitted to the series and these models can show the degree to which series values are correlated with their own past values and whether a reasonable model could be based on an ARIMA approach. The relative strength of these two relationships is examined; are prices more closely explained by the competitor's actions or the airlines own past price setting?

History

School

  • Architecture, Building and Civil Engineering

Citation

PITFIELD, D.E., 2005. A time series analysis of the pricing behaviour of directly competitive 'low-cost' airlines. International Journal of Transport Economics, 32 (1), pp. 15-39

Publisher

© La Nuova Italia

Version

AM (Accepted Manuscript)

Publication date

2005

Notes

This article was published in the journal, International Journal of Transport Economics [© La Nuova Italia] and is also available at: http://www.libraweb.net/sommari.php?chiave=67

ISSN

0303-5247

Language

en

Exports

Logo branding

Keyword(s)

Exports