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Pricing and Competition in Australasian Air Travel Markets

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  • Hazledine, Tim

Abstract

The paper analyses more than ten thousand observations on prices charged for air travel on 1001 flights on eight New Zealand and twenty one trans-Tasman flights observed in 2004 and 2005. The main findings are (i) that routes on which Qantas competes with Air New Zealand tend to have air fares around 20% lower than routes served only by Air NZ; (ii) Emirates and Pacific Blue offer much lower fares across the Tasman but yet cannot achieve substantial markets share implying that (iii) these airlines do not offer much competitive constraint on the pricing of the larger carriers so that (iv) elimination of independent competition between Air NZ and Qantas would be likely to result in air fare increases.

Suggested Citation

  • Hazledine, Tim, 2006. "Pricing and Competition in Australasian Air Travel Markets," Working Paper Series 18935, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    • Handle: RePEc:vuw:vuwcsr:18935
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/18935
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    1. Xiaowen Fu & Mark Lijesen & Tae H. Oum, 2006. "An Analysis of Airport Pricing and Regulation in the Presence of Competition Between Full Service Airlines and Low Cost Carriers," Journal of Transport Economics and Policy, University of Bath, vol. 40(3), pages 425-447, September.
    2. Hazledine, Tim & Green, Hayden & Haugh, David, 2003. "The Smoking Gun? Competition and Predation in the Trans-Tasman Air Travel Market," Working Papers 191, Department of Economics, The University of Auckland.
    3. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    4. Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
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