The effect of open access rail competition on average prices. The case of Milan - Ancona

Italy, together with Austria, UK and Czech Republic, is among the few European countries where non marginal open access competition in rail market exists. The entry of the newcomer NTV during 2012, with a fleet of some 25 trains, has changed quite radically the supply and the existing market conditions in Italy, both inside rail sector and versus other modes. The effect of this competition is, however, usually measured only in terms of market shares. The aim of this paper is, instead, to shed some light on the effect of competition on the pricing policies of the incumbent. To do that, we focused on the opening of a new fast direct service by the newcomer NTV between Milano and Ancona, three times a day. Through a web crawler, we built a dataset of daily available fares, collected directly from the operators' internet web sites. The dataset includes prices on existing direct and indirect trains, between August 1st 2013 and March 2014, from 30 to 1 days of advance booking, obtaining a total of 120,000 observations. The period includes the entry of NTV on the route, before operated daily by Trenitalia, which happened on December 15th 2013 and shows both the prices' seasonal variations and the reaction of Trenitalia. Results show that the price reaction by Trenitalia after the entry of NTV is limited to the 1st class, while prices on the 2nd class remain quite unchanged. The only effect is that the weekend peaks (usually Friday and Sunday) are smoothed, i.e. after NTV cheap fares are available if booked many days in advance. NTV pricing strategy is more aggressive to gain market shares on the new service and it offers always better fares than the public operator does. Only in the very last days before departure, the higher frequency of NTV allows it to obtain higher fares

Competitive vs. monopolistic routes: Are fares so different?

Many different carriers operating on the same route is usually regarded as a signal of a competitive setting and, therefore, as a situation potentially beneficial for customers in terms of lower prices. This is obviously true if the argument involves a comparison between different market forms given the level of demand. Across different routes, however, the number of carriers depends also on the level of demand for each particular pair of destinations, so that we cannot assume a priori that fares per kilometre on "monopolistic" routes are higher than on more "competitive" ones. We study the price policy during 2008 of the two main European low cost carriers, Ryanair and easyJet, with reference to one hundred of the least, and one hundred of the most, dense routes among those operated by the two carriers respectively. The systematic occurrence of higher (for Ryanair), or at least no lower (for easyJet), average prices on competitive routes if compared with prices on routes with a single carrier by the same airline, surprising as it may be, supports the conclusion that a low level of demand is sufficient to impose low fares to some extent irrespective of the degree of competition

The competitive landscape of air transport in Europe

Competition between airlines and airports increased significantly since the deregulation of the intra-European air transport market in 1997. The passenger has a wider choice in terms of routings and departure airports than twenty-five years ago and pays a lower price. In this paper we investigate in which parts of Europe airline and airport competition are most intense and how the competitive landscape has changed since the liberalisation of the intra-European market. Competition levels are modelled for all air transport markets available to consumers in each western-European municipality using a Multinomial Logit (MNL) model. This allows us to determine how competitive the air transport product available to consumers in each of those municipalities truly is and how competition levels have changed. As opposed to most other competition studies we take all viable direct and indirect flight alternatives into account, as well as competing alternatives from nearby (adjacent) airports. This makes it the most extensive analysis of competition in the European aviation industry performed to date. As expected the results show that airline competition, allowing for grouping of the airlines belonging to the same alliance together, has in general increased since the liberalisation of the intra-European market. This can mainly be ascribed to the rise of the low cost business model. The spatial analysis however shows an uneven outcome. Changes in airline competition are most pronounced in areas that were previously not well served, such as the more remote regions in the United Kingdom, Spain and Italy. In Germany airline competition is lagging behind due to the strong dominance of the STAR alliance. In large parts of Scandinavia, but also in parts of France and Spain, airline competition is considerably less. These areas are often served only by a handful of airports and/or airlines, limiting airline choice and therefore competition

EU-US open skies agreement: What is changed in the north transatlantic skies?

This article presents analysis of air service levels and competition dynamics in the transatlantic market before and after the EU-US Open Skies Agreement (OSA) signed in 2008. By comparing direct and connecting flights in a typical off-peak week, we investigate whether the EU-US OSA has led to more choices for transatlantic travelers. We examine the impact of the EU-US OSA on competition between carriers, alliances, and hub airports. The results show that the number of direct transatlantic connections and served airport pairsdecreased and only indirect competition increased