Market share modeling in a newly liberalized lowdemand market

Abstract

In the last decades, the airline industry experienced a tendency towards airspace deregulation. When airspace is liberalized, the airlines in the market have to re-position themselves the market since new airlines are expected to offer flights in the market. More competition asks for optimal revenue management and positioning of the flights so that no market shares are lost. The goal of this research is to create a market share model that is able to detect the airline attributes that show significant impact on market share in the markets before and after liberalization. The generalized linear model (GLM) method with logit link function was chosen to create the airline market share model which is a novelty in the academic body of knowledge. The market share model is applied to the case study of the Azorean archipelagos that was liberalized in 2015. With the GLM calculation, ᵦ-coefficients can be determined with which the significance and the impact of the independent variables on market share can be evaluated and compared. When comparing the situation before and after liberalization for the return market between Ponta Delgada and Lisbon, the impact of frequency per day was found to increase due to liberalization whereas the impact of the constant decreases. Also, the importance of the ticket price was higher after liberalization which supports the findings in literature, that liberalization triggers more competition and results in higher pressure on price.