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Authors

Seliverstov D.

Degree
Postgraduate Student, Moscow State Institute for International Relations
E-mail
DENIS_FP@mail.ru
Location
Moscow
Articles

The contestibility of airline market

The airline industry is usually given as an example to prove the contestability theory in academic research. It is widely accepted that the carriers can with almost no cost enter new markets with the available aircraft. But does the contestability really apply to the industry? The article is aimed at analyzing the principal conditions of the contestability with regard to the U. S. airline industry, including the role of potential and real competition, the aspects of entry barriers and sunk costs. On the basis of the previous studies and research conducted in this article the author made a conclusion that the airline industry can be characterized as a weak form of the contestable market. It is explained by significant entry barriers and stronger real competition influence on the behavior of the airline market actors. At the same time the article points out an important role of the competing airline type when analyzing market structure. It was found out that the participation of low cost carriers contributes a lot to creating competitive environment. The results of the article are of value for analyzing and planning the antitrust policy of the airline market, including the Russian market.
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The Entry Effect of Low Cost Carriers in the Airline Market

The low cost airlines are aggressively expanding into new markets in most countries. LCC effect has captured the interest of government bodies and academia. However the LCC phenomenon receives little attention in Russian academic research. With the aim of understanding the role and impact of low cost carriers on civil aviation development the article intends to compare the entry effects of NWCs and LCCs on market yield and demand in the U.S. airline market. According to my research low cost carriers have more pronounced shortterm and long-term impact on both market parameters regardless of its structure and participants. Entry of budget airlines leads to substantial fare reduction as well as increase in passenger traffic. Taking into account this effect LCCs are considered to be the main driver of competition in the airline market and important welfare-enhancing factor.
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