Issues in Network Development by National Airlines: The Case of Ukraine

This paper uses example of Ukraine to explore the issue of national airlines’ strategies on the global deregulated airline market. Ukraine’s case is unusual in a sense that the country currently has two main national carriers, which do not directly compete on any international route. The carriers’ success on the global deregulated market requires a well-established and structured network, which none of the two carriers can offer at this time. We suggest that an alliance between the two carriers is a preferable option to a merger. The analysis is extended to suggest alliances as a possible policy option on the deregulated airline markets.

A Tax Evasion - Bribery Game: Experimental Evidence from Ukraine

This paper examines the issue of tax evasion by enterprises through underreporting activity. We develop a view of this phenomenon as an equilibrium of the game between a businessman and an imperfectly monitored supervising official, in which a businessman can hide part of his profit and offer bribe to official. We determine conditions under which such tax evasion and bribery become wide-spread in the society, resulting in shadow economy. The game is put into an experimental setting in Kiev, Ukraine, with the emphasis of spreading of the tax evasion and bribery activity in the laboratory setting. We find that once it becomes known that substantial share of subjects playing the role of supervising officials agree to accept bribes from subjects playing the role of businessmen, the latter offer bribes more aggressively. Yet, this in turn does not affect the behavior of subjects playing the role of supervising officials.Tax Evasion, Bribery, Experiment, Learning in Games

Increasing the number of destinations and passengers an airport serves has a positive effect on regional economic development.

As the economic recovery continues, airports are experiencing growing passenger numbers. But does economic growth create more demand for air travel, or does air travel help to drive economic growth? In new research which looks at data from metropolitan areas over 17 years, Volodymyr Bilotkach finds that adding 100 passengers a day to the volume an airport served can lead to between 98 and 315 new local jobs, and that adding a new destination can lead to between 98 and 223 new jobs and the opening of between 4 and 15 new businesses

Balancing competition and cooperation : evidence from transatlantic airline markets

In the last two decades, airline alliances were not only successful in extending the size of their networks, but also received approvals by public authorities to intensify their ooperation through to merger-like revenue-sharing joint ventures (JVs). We empirically investigate the impact of the implementation of such joint ventures on both the respective airlines’ competitive strategies as well as productive efficiency. Using U.S. DOT T100 International Segment data and applying airline-market fixed effects models, we find that joint ventures – compared to services with a lower degree of cooperation – lead to a 3-5 percent increase in capacity between the respective partner airlines’ hub airports; however, this is done at the expense of services elsewhere in the network. Productive efficiency, as measured by load factors, is found to be 0.5-5 percent lower for joint venture routes compared to routes operated under antitrust immunity only. We use our empirical results to discuss implications for the balancing of competition and cooperation in transatlantic airline markets

Airline alliances, antitrust immunity and market foreclosure

This paper examines the issue of market foreclosure by airline partnerships with antitrust immunity. Overlapping the data on frequency of service and passenger volumes on nonstop routes on the transatlantic airline market with the information on dynamics of airline partnerships, we find evidence consistent with the airlines operating under antitrust immunity refusing to accept connecting passengers from the carriers outside of the partnership at respective hub airports. When an airline partnership is granted antitrust immunity, airlines outside this partnership end up reducing their traffic to the partner airlines’ hub airports by 2.6-8.5 percent (depending on the specification and estimation technique involved). Our results suggest ambiguous welfare effects of antitrust immunity on some markets, where previous studies indicated airline consolidation should benefit consumers

Are Airlines' Price Setting Strategies Different?

Using a sample of fare quotes for non-stop travel from New York to London, this paper investigates the dynamics of offered fares as the departure date nears. We find that the general trend is toward fare increase at an accelerated rate as the departure date approaches. Clear differences in price-setting strategies among the carriers competing on a particular route are documented

Scheduled service versus personal transportation: the role of distance

This paper analyzes both theoretically and empirically the relationship between distance and frequency of scheduled transportation services. We study the interaction between a monopoly firm providing high-speed scheduled service and personal trans- portation (i.e., car). Most interestingly, the carrier chooses to increase frequency of service on longer routes when competing with personal transportation because provid- ing a higher frequency (at extra cost) it can also charge higher fares that can boost its profits. However, when driving is not a relevant option, frequency of service de- creases for longer flights consistently with prior studies. An empirical application of our analysis to the European airline industry con?rms the predictions of our theoretical model.Short-haul routes, long-haul routes, flight frequency, distance

Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers

Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 - June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.Easyjet, Intertemporal Pricing, Panel Data, Ryanair, Yield Management

Are Airlines' Price-Setting Strategies Different?

Using a sample of fare quotes for non-stop travel from New York to London, this paper investigates the dynamics of offered fares as the departure date nears. We find that the general trend is toward fare increase at an accelerated rate as the departure date approaches. Clear differences in price-setting strategies among the carriers competing on a particular route are documented.airline industry, price dynamics