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Pricing Strategies of the European Low-Cost Carriers Explained Using Porter's Five Forces Model

Author

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  • L. Moreno-Izquierdo

    (Department of Applied Economic Analysis and Institute of International Economics (IEI), University of Alicante, Edificio de Institutos Interuniversitarios, Campus Universidad de Alicante de S. Vicente, sn, 03690 San Vicente del Raspeig, Spain)

  • A.B. Ramón-Rodríguez

    (Department of Applied Economic Analysis, and University Institute of Tourism Research, University of Alicante, Spain)

  • J.F. Perles-Ribes

    (Department of Applied Economic Analysis, and University Institute of Tourism Research, University of Alicante, Spain)

Abstract

In recent decades, the air transport sector has experienced major changes, including the emergence of the low-cost airlines. The strategies adopted by these new companies have given rise to a revitalization of the sector, particularly in Europe and the USA. This article analyses the pricing strategy followed by the low-cost carriers based on Porter's analysis. The research is based on the study of a total of 90 traditional tourist routes between the UK and Spain. As in previous studies, the high level of concentration and advance purchase of fares are the most important components explaining the price dispersion. However, the methodology used (principal component analysis + panel) has generated another series of highly interesting results regarding the role of the Internet and tourism in price setting which require further in-depth study.

Suggested Citation

  • L. Moreno-Izquierdo & A.B. Ramón-Rodríguez & J.F. Perles-Ribes, 2016. "Pricing Strategies of the European Low-Cost Carriers Explained Using Porter's Five Forces Model," Tourism Economics, , vol. 22(2), pages 293-310, April.
    • Handle: RePEc:sae:toueco:v:22:y:2016:i:2:p:293-310
    DOI: 10.5367/te.2016.0551
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    References listed on IDEAS

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