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.

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?

Data extraction

We asked a large language model to extract each data column below from each paper.

Market Structure and Competitive Environment

• Geographic market: various, e.g., Turkish international airline market, US domestic market
• Number of airlines: variable
• Market structure: oligopoly, competitive dynamics

Competitive Analysis Approach

• Research methodology: variable, e.g., panel regression, content analysis.
• Data collection period: variable
• Sample size of airlines studied: variable

Factors Influencing Competitive Performance

• Positive influencing factors: fleet composition, market share.
• Negative influencing factors: high operational costs.

Competitive Strategies and Actions

• Types of competitive moves: schedule-based, price-related.
• Strategies for market positioning: service differentiation.

Performance Measurement Approach

• Operational performance indicators: revenue passenger kilometers, load factors.
• Financial performance indicators: net profit/loss.

Results

Characteristics of Included Studies

• Study Focus: Competition, pricing strategies, market structure.
• Methodology: Econometric analysis, empirical models.
• Market Context: US, European, Brazilian aviation markets.

Thematic Analysis

Market Structure and Competitive Dynamics

Key findings:

• Hub-and-Spoke Network Effects: Allow cost reduction, enhance service frequency.
• Market Concentration Impacts: Lower concentration enhances efficiency and reduces fares.
• Entry Barriers and Competitive Responses: Scale advantages create barriers; LCCs alter landscapes.

Resource-Based Competitive Factors

Key findings:

• Fleet Composition:
• Financial Resource Deployment: Efficient companies compete effectively.

Strategic Positioning Elements

Key findings:

• Pricing Power: Affected by market structure.
• Service Differentiation: Target different market segments.
• Alliance Effects: Airline partnerships enhance market power.

Competitive Position Indicators

• Market Concentration: Higher concentration may lead to increased market power.
• Operational Efficiency: Improves cost position and profitability.
• Service Quality: Customer satisfaction impacts loyalty and prices.

References

• Fageda, X. (2005). Measuring Conduct and Cost Parameters in the Spanish Airline Market.
• Berry, S. T. (1990). Airport Presence as Product Differentiation.
• Oum, T., Zhang, A., & Zhang, Y. (1993). Inter-Firm Rivalry and Firm-Specific Price Elasticities in Deregulated Airline Markets.
• Yaşar, M., & Gerede, E. (2023). Operational and Financial Performance Analysis in Turkish International Airline Market.
• Zhang, L. (2020). Market Conduct and Performance of China's Civil Aviation Industry.