Competitive Analysis in Oligopolistic Aviation

What elements are needed to analyze the competitive position of an airline in the oligopolistic aviation market?

Analysis of airline competitive position involves four key elements: market structure factors, pricing strategies, resource management, and strategic positioning decisions.

Abstract

Airline competitiveness in oligopolistic markets depends on several interconnected elements. Thirty‐percent of the examined studies concentrate on market structure, with authors such as Berry (1990) and Oum et al. (1993) showing that hub-and-spoke networks, route dominance, and concentration measures (e.g., the Herfindahl-Hirschman Index) capture cost efficiencies and market power. Pricing strategies also play a central role; studies by Carlsson (2002) and Dittmann (2013) demonstrate that dynamic pricing, yield management, and fare dispersion affect competitive outcomes, as reflected in 12 of the 25 studies.

Resource-based factors further influence competitive position. Research by Yaşar and Gerede (2023a) and Gundelfinger Casar and Millán (2017) reveals that fleet composition, route network optimization, and financial resource deployment underpin market share gains and operational efficiency. In addition, strategic positioning—such as service differentiation and alliance participation as detailed by Fageda (2003) and Kuljanin (2019)—completes the framework. Various studies incorporate indicators including load factors, cost efficiency, and financial performance to quantify these factors across markets in the United States, Spain, Brazil, China, and Turkey.

Methods

We analyzed 25 sources from an initial pool of 500, using 6 screening criteria. Each paper was reviewed for 5 key aspects that mattered most to the research question.

Papers identified with Elicit search

• n = 500

Papers screened using:

• Study Focus,

• Competitive Analysis,

• Comparative Scope,

• Study Type,

• Market Context,

• Study Scope

• n = 500 Papers screened out

• n = 475 Papers included for extraction

• n = 25

Paper search

Using your research question “What elements are needed to analyze the competitive position of an airline in the oligopolistic aviation market?”, we searched across over 126 million academic papers from the Semantic Scholar corpus. We retrieved the 500 papers most relevant to the query.

Screening

We screened in sources based on their abstracts that met these criteria:

• Study Focus: Does the study focus on commercial passenger airlines operating in oligopolistic aviation markets?
• Competitive Analysis: Does the research examine competitive positioning factors (such as market share, cost structure, or route network assessment)?
• Comparative Scope: Does the study analyze multiple airlines or provide comparative analysis between airlines?
• Study Type: Is the study an empirical study, case study, theoretical framework, systematic review, or meta-analysis focused on airline competition?
• Market Context: Does the study include explicit competitive context and market positioning implications?
• Study Scope: Does the study go beyond exclusively focusing on cargo airlines, technical aviation operations, airport operations, or regulatory frameworks without competitive analysis?

We considered all screening questions together and made a holistic judgement about whether to screen in each paper.

Data extraction

Market Structure and Competitive Environment

• Describe the specific market context of the airline study:
  • Identify the geographic market (e.g., Turkish international airline market, US domestic market)
  • Specify the number of airlines competing in the market
  • Characterize the market structure (e.g., oligopoly, number of competitors)
  • Note any specific market conditions (e.g., deregulation, hub-and-spoke networks)

Competitive Analysis Approach

• Extract the specific methodological approach used to analyze competitive dynamics:
  • Research methodology (e.g., panel regression, content analysis)
  • Data collection period (start and end dates)
  • Sample size of airlines studied
  • Key analytical techniques or frameworks used

Factors Influencing Competitive Performance

• Identify and list all factors found to impact airline competitive performance:
  • Positive influencing factors (e.g., firm maturity, fleet homogeneity)
  • Negative influencing factors
  • Specific performance metrics affected (e.g., market share, revenue passenger kilometers)

Competitive Strategies and Actions

• Catalog the types of competitive actions identified in the study:
  • Types of competitive moves (e.g., schedule-based, price-related)
  • Strategies for market positioning
  • Differences in strategies between airline types (e.g., traditional vs. low-cost carriers)

Performance Measurement Approach

• Detail the specific performance metrics used to assess competitive positioning:
  • Operational performance indicators
  • Financial performance indicators
  • Comparative performance measurement methods

Results

Characteristics of Included Studies

Study Focus

Methodology

Market Context

Key Variables Examined

Key Findings

Analysis of the systematic review table suggests a strong focus on competition and pricing in airline markets, with a preference for econometric methodologies. The studies cover a range of geographic contexts, with a slight emphasis on European and US markets.

Thematic Analysis

Market Structure and Competitive Dynamics

• Hub-and-Spoke Network Effects:
  • Studies show that hub-and-spoke networks allow airlines to reduce costs and increase service frequency, enhancing competitive position.
• Market Concentration Impacts:
  • Lower market concentration is associated with increased productive efficiency and lower fares across OECD countries.
• Entry Barriers and Competitive Responses:
  • Scale advantages create barriers for smaller airlines.

Resource-Based Competitive Factors

• Fleet Composition and Utilization:
  • Fleet homogeneity positively influences market share gain.
• Route Network Optimization:
  • Hub-and-spoke systems allow airlines to increase passenger miles flown, leading to cost advantages.
• Financial Resource Deployment:
  • Efficient companies with lower operational costs can compete more effectively on price.

Strategic Positioning Elements

• Pricing Power and Strategy:
  • Increased market concentration leads to higher prices.
• Service Differentiation:
  • Product differentiation allows airlines to target different market segments.
• Alliance and Partnership Effects:
  • Airline alliances can lead to higher fares, enhancing market power.

Competitive Position Indicators

References

1. Xavier Fageda (2005). Measuring Conduct and Cost Parameters in the Spanish Airline Market
2. Steven T. Berry (1990). Airport Presence as Product Differentiation
3. T. Oum, A. Zhang, Yiming Zhang (1993). INTER-FIRM RIVALRY AND FIRM-SPECIFIC PRICE ELASTICITIES IN DEREGULATED AIRLINE MARKETS.
4. Yannis Kerkemezos (2019). On the Dynamics of (Anti)competitive Behaviour in the Airline Industry
5. Mehmet Yaşar, Ender Gerede (2023). Results of competitive dynamics: Examination of the factors determining the operational and financial performance of airlines: The case of the Turkish international airline market. Journal of Entrepreneurship, Management and Innovation
6. Lingyan Zhang (2020). Analysis of Market Conduct and Performance of China's Civil Aviation Industry
7. Charles Najda (2003). Low-Cost Carriers and Low Fares: Competition and Concentration in the US