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Low-cost carriers versus full service carriers in ASEAN: The impact of liberalization policy on competition

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  • Hanaoka, Shinya
  • Takebayashi, Mikio
  • Ishikura, Tomoki
  • Saraswati, Batari

Abstract

This study analyses the ASEAN Single Aviation Market (ASAM) policy to be introduced by the end of 2015. We conduct a scenario study to estimate the impact of low-cost carrier (LCC) network expansion under liberalized air transport policies in the ASEAN region. Establishing joint ventures is a possible way for foreign carriers to expand the network in this region, even after starting ASAM. This is unique as joint ventures are not only subsidiaries of the full-service carriers, as is the case in the United States and Europe. We also apply a quantitative air transport market model to estimate the policy impact of the entry of new LCCs on routes from three ASEAN hub airports to Manila airport, which covers the impact on the whole network. The model produces several significant results, including that the entry of one LCC on one route may affect the fare, frequency, and profitability of related competitive routes for the entire network.

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  • Hanaoka, Shinya & Takebayashi, Mikio & Ishikura, Tomoki & Saraswati, Batari, 2014. "Low-cost carriers versus full service carriers in ASEAN: The impact of liberalization policy on competition," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 96-105.
    • Handle: RePEc:eee:jaitra:v:40:y:2014:i:c:p:96-105
    DOI: 10.1016/j.jairtraman.2014.06.008
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    6. Prayoga Permana & Herman W. Hoen & Ronald L. Holzhacker, 2020. "Political Economy of ASEAN Open Skies Policy: Business Preferences, Competition and Commitment to Economic Integration," Journal of Asian Economic Integration, , vol. 2(1), pages 44-61, April.
    7. Dewansh Raheja & Y. X. LEE & Z. W. Zhong, 2017. "Utilizing Regression Algorithms for ATS Route Forecasts," Journal of ICT, Design, Engineering and Technological Science, Juhriyansyah Dalle, vol. 1(1), pages 10-12.
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    10. Pearson, James & O'Connell, John F. & Pitfield, David & Ryley, Tim, 2015. "The strategic capability of Asian network airlines to compete with low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 1-10.
    11. Samuel D. Barrows, 2019. "Assessing the Stock Market Performances of EU Low-Cost Airlines," International Journal of Economics and Financial Issues, Econjournals, vol. 9(4), pages 95-100.
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    14. Zhong, Z.W. & Varun, Dhir & Lin, Y.J., 2017. "Studies for air traffic management R&D in the ASEAN-region context," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 15-20.
    15. Babić, Danica & Kalić, Milica, 2018. "Modeling the selection of airline network structure in a competitive environment," Journal of Air Transport Management, Elsevier, vol. 66(C), pages 42-52.
    16. Czerny, Achim I. & Fu, Xiaowen & Lei, Zheng & Oum, Tae H., 2021. "Post pandemic aviation market recovery: Experience and lessons from China," Journal of Air Transport Management, Elsevier, vol. 90(C).
    17. Fu, Xiaowen & Jin, Huan & Liu, Shaoxuan & Oum, Tae H. & Yan, Jia, 2019. "Exploring network effects of point-to-point networks: An investigation of the spatial patterns of Southwest Airlines’ network," Transport Policy, Elsevier, vol. 76(C), pages 36-45.
    18. Bilotkach, Volodymyr & Kawata, Keisuke & Kim, Tae Seung & Park, Jaehong & Purwandono, Putut & Yoshida, Yuichiro, 2019. "Quantifying the impact of low-cost carriers on international air passenger movements to and from major airports in Asia," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 28-57.
    19. Hu, Yue & Dai, Liang & Fuellhart, Kurt & Witlox, Frank, 2024. "Examining competition among airline regarding route portfolios at domestic hubs under government regulation: The case of China's aviation market," Journal of Air Transport Management, Elsevier, vol. 116(C).
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    21. Bowen, John T., 2016. "“Now everyone can fly†? Scheduled airline services to secondary cities in Southeast Asia," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 94-104.
    22. Dai, Liang & Derudder, Ben & Liu, Xingjian, 2018. "The evolving structure of the Southeast Asian air transport network through the lens of complex networks, 1979–2012," Journal of Transport Geography, Elsevier, vol. 68(C), pages 67-77.

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