Determinants of route presence in the EU airline industry

Abstract

This paper investigates the determinants of airlines’ route presence in the single EU aviation market by estimating two probit models one for full-service airlines and one for low-cost carriers which specify the presence (or absence) of an airline’s service on the route as a function of its airport presence measures, the competition it faces from other airlines, and general route characteristics. The results point to the existence of dominat-firm advantages, domestic-firm privileges, and substantial airport-facilities-related barriers to entry in the EU airline industry. They further indicate that served routes are characterized by relative time efficiency of air travel (in comparison to car travel), large endpoint cities’ populations as well as per capita GDPs; and that competitive effects between full-service and low-cost airlines are asymmetric.