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This study analyzes easyJet's fare response to new entry.
In the next sections, we investigate the source of variations in the easyJet fare response by applying panel data analysis.
The paper builds on the literature referring to airline pricing strategies and competition, especially works dealing with the fare response to new entries.
We therefore believe that if a LCC fare response to entry exists, the greater part will take place in a short time window.
To the best of our knowledge, this is the first work that explicitly aims to empirically measure the fare response of low-cost carriers.
Next we determine which variables affect the fare response by building up a panel of observations for each delta (∆P, ∆β and ∆D) with length equal to the time window (7 days).
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New entries on alternative or adjacent routes could also induce fare responses.
This research pioneers the empirical study of low-cost carrier fare responses to new entries.
They acknowledged colluding with rivals over cargo rates and fuel surcharges, which had been added to fares in response to rising oil prices.
In a statement, British Airways said that from August 2004 to January 2006 it colluded with Virgin Atlantic over the surcharges added to fares in response to rising oil prices.
Ryanair said it cut fares in response to expansion by competitors and that lower fuel prices and cost cuts would help pay for the reductions.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com