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Modeling competition among airline itineraries

Author

Listed:
  • Lurkin, Virginie
  • Garrow, Laurie A.
  • Higgins, Matthew J.
  • Newman, Jeffrey P.
  • Schyns, Michael
Abstract
Discrete choice models are commonly used to forecast the probability an airline passenger chooses a specific itinerary. In a prior study, we estimated an itinerary choice model based on a multinomial logit specification that corrected for price endogeneity. In this paper, we extend the analysis to include inter-itinerary competition along three dimensions: nonstop versus connecting level of service, carrier, and time of day using nested logit (NL) and ordered generalized extreme value (OGEV) models. To the best of our knowledge, these are the first NL and OGEV itinerary choice models to correct for price endogeneity. Despite the many structural changes that have occurred in the airline industry, our results are strikingly similar to models estimated more than a decade ago. These results are important because it suggests that customer preferences, on average, have been stable over time and are similar across distribution channels. The stability in inter-itinerary competition patterns provides an important practical implication for airlines, namely it reduces the need to frequently update the parameter estimates for these models.

Suggested Citation

  • Lurkin, Virginie & Garrow, Laurie A. & Higgins, Matthew J. & Newman, Jeffrey P. & Schyns, Michael, 2018. "Modeling competition among airline itineraries," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 157-172.
    • Handle: RePEc:eee:transa:v:113:y:2018:i:c:p:157-172
    DOI: 10.1016/j.tra.2018.04.001
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    References listed on IDEAS

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    1. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
    2. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
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    Cited by:

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    4. Redondi, Renato & Birolini, Sebastian & Morlotti, Chiara & Paleari, Stefano, 2021. "Connectivity measures and passengers’ behavior: Comparing conventional connectivity models to predict itinerary market shares," Journal of Air Transport Management, Elsevier, vol. 90(C).
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    7. Fukushi, Mitsuyoshi & Delgado, Felipe & Raveau, Sebastián & Santos, Bruno F., 2022. "CHAIRS: A choice-based air transport simulator applied to airline competition and revenue management," Transportation Research Part A: Policy and Practice, Elsevier, vol. 155(C), pages 297-315.
    8. Klophaus, Richard & Grosche, Tobias, 2020. "Consumer surplus analysis of selected long-haul air transport routes connecting Germany with California and China," Research in Transportation Economics, Elsevier, vol. 80(C).
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    10. Kölker, Katrin & Lütjens, Klaus & Gollnick, Volker, 2024. "Analyzing global passenger flows based on choice modeling in the air transportation system," Journal of Air Transport Management, Elsevier, vol. 115(C).
    11. Abdelghany, Ahmed & Guzhva, Vitaly S., 2022. "Exploratory analysis of air travel demand stimulation in first-time served markets," Journal of Air Transport Management, Elsevier, vol. 98(C).

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