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

We asked a large language model to extract each data column below from each paper. We gave the model the extraction instructions shown below for each column.

• 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

Thematic Analysis

Market Structure and Competitive Dynamics

Key findings related to market structure and competitive dynamics include:

• Hub-and-Spoke Network Effects: Berry (1990) argues that hub-and-spoke networks allow airlines to reduce costs and increase service frequency, enhancing competitive position.
• Market Concentration Impacts: Gonenc and Nicoletti (2000) find that lower market concentration is associated with increased productive efficiency and lower fares across OECD countries.
• Entry Barriers and Competitive Responses: Fageda (2003) notes that scale advantages of major airlines in the Spanish market create barriers for smaller airlines.

Resource-Based Competitive Factors

Key findings related to resource-based competitive factors include:

• Fleet Composition and Utilization: Yaşar and Gerede (2023a) identify fleet homogeneity as a positive influencing factor for market share gain and operational performance.
• Route Network Optimization: Berry (1990) highlights how hub-and-spoke systems allow airlines to reduce the number of round-trips necessary while increasing passenger miles flown, potentially leading to cost advantages.
• Financial Resource Deployment: Yaşar and Gerede (2023a) identify financial resources as a positive influencing factor for market share gain.

Strategic Positioning Elements

Key findings related to strategic positioning elements include:

• Pricing Power and Strategy: Carlsson (2002) finds that market structure significantly affects Business class ticket prices in European markets.
• Service Differentiation: Fageda (2003) highlights product differentiation as an essential feature of airline competition.
• Alliance and Partnership Effects: Oum et al. (1993) mention the use of commission overrides to travel agents as a strategy to enhance market position.

Competitive Position Indicators

Analysis of the competitive position indicators table reveals:

• The studies collectively mentioned 15 different indicator types used to assess airline competitiveness.
• The most common were operational indicators, market structure indicators, and financial indicators.