Entry effect of low cost carriers on airport pairs demand model using market concentration approach
The trend of open sky policies and growth of low cost airlines, the topic of airport pairs demand is gradually being addressed in the golden aviation circle of Northeast Asia. The variety of flight services among the four major metropolises with dual airport systems leads to a competition cooperation relationship existing between various airports and airlines. Therefore, this study investigates the causal relationship between the route level passenger demand and influential factors using aggregate data collected through website observations. The empirical study focuses on direct flights of airport pair routes among Taipei, Shanghai, Seoul, and Tokyo. Results of the passenger regression model indicate that frequency, code share, and morning flights have positive impacts on increasing passenger numbers for airlines. Further, the market concentration degree of Herfindahl Hirschman Index and entry effect of low cost carriers are important for the route level passenger demand. In addition, routes with departures and arrivals in hub airports have a considerable attraction relative to other airport pair routes. Finally, the proposed passenger model performs well in predicting market share, especially for routes with high demand.