Survival in the U.S. Domestic Airline Market: Strategies for Entry, Exit, and Air Fare Competition
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The purpose of this study was to identify factors that distinguished between airlines entering new routes or exiting existing routes between 2011–2015, and determine factors related to air fare levels between 2005–2015. Part A employed a cause-type ex post facto design to determine the relationship between the targeted variables and the criterion variable, which distinguished between the “enter” and “exit” groups. Part B employed an explanatory correlational design to measure the relationship between the targeted variables and air fare levels. Research factors included carrier type (full service vs. low-cost), route length, city populations and per capita income at each endpoint of a city-pair market, market concentration, number of competitors, the presence of a hub airport at the origin or destination airports, average air fare level of the airline with the largest average air fare in a city-pair market, and the carrier type of the airline having the largest fare. The sample consisted of 2,111 cases for Part A and 1,082 cases for Part B. A logistic regression analysis (Part A) found that airlines were: 1.5 times more likely to enter routes at least 850 miles long vs. shorter than 850 miles, 1.5 times more likely to enter a new route at Endpoint 1 with a city population of at least 2.8 million vs. fewer than 2.8 million, 1.33 times more likely to enter a new route at Endpoint 1 with a city per capita income of at least $47,254 vs. fewer than $47,254, and nearly two times more likely to enter a new route with one or more competitors than no competitors. FSCs also were 1.7 times more likely than LCCs to enter a new route. A multiple regression analysis (Part B) found that all targeted factors had a significant relationship with air fares. Findings suggest there are still distinctions between FSC and LCC business models, and airlines might consider expanding route maps in rural markets instead of major cities or metropolitan areas.