EURO 2024 Copenhagen
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2877. On airline frequency competition for routes linking emerging airports

Invited abstract in session MC-55: Airline Applications I, stream Transportation.

Monday, 12:30-14:00
Room: S02 (building: 101)

Authors (first author is the speaker)

1. Amit Bardhan
Faculty of Management Studies, University of Delhi

Abstract

We analyse a scenario where two competing airlines, are considering new routes to emerging airports. These airlines can design either direct routes or connect passengers via their respective hubs. The total market size for a route is influenced by two key factors: flight frequency and network connectivity, while passengers prefer direct flights over those with layovers. An airline’s revenue on a route hinges on both the overall market size and its capacity share. Therefore, each airline faces a strategic decision regarding the optimal frequency of flights to allocate on each new route. The cost of deploying capacity on a route encompasses several factors: direct aircraft operating costs, airport fees (landing, gate usage), and passenger handling expenses. Airport fees are typically higher at major hubs, which may also impose slot restrictions due to capacity constraints. Airlines’ objective is to maximize their profits. To analyse this frequency competition, we propose a game-theoretic model similar to developed in Wang et al. (2022). By analysing the model’s equilibrium, we obtain insights, such as the conditions under which airlines might reallocate capacity from established, high-traffic routes to serve emerging airports. The validity of this model has been demonstrated using data from India’s Regional Connectivity Scheme (RCS), which aims to promote air connectivity to unserved and underserved airports.

Keywords

Status: accepted

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