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Low-Cost Carriers Competition in Europe Essay

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Updated: Aug 24th, 2021

Europe is a region with unique characteristics that can influence the entry of low-cost carriers (LCCs). Before considering the possible barriers to the emergence of new LCCs, it is crucial to acquire a general picture of the industry. According to Pierce (2016), the airline industry is booming around the globe with Europe not being an exception. A return on airline capital rose from 2% in 2010 to 11% in 2016 (Pierce, 2016). The demand for air travel is also growing, especially in areas traditionally underserved by the public transportation system (Lieshout, Malighetti, Redondi, & Burghouwt, 2016). Due to the rise of the industry, the competition continues to intensify, putting pressure on new market entrants. There are three major barriers to the emergence of new service providers that are connected to the maturity of the public transportation system in Europe. First, Bubalo and Gaggero (2015) point out that the abundance of airline companies in Europe sets high-quality standards. New companies would have to make enormous capital investments to adhere to these standards and find their customers. Second, Lieshout et al. (2016) mention that there are strong airline alliances that dominate the market. For instance, in Germany, the competition is lagging due to the strong influence of the STAR alliance (Lieshout et al., 2016). Third, in Europe, high-speed railways (HSR) are taking over a large proportion of the public transportation market (Albalate, Bel, & Fageda, 2015). Even though HSR stations may provide additional passengers to the emerging LCCs, most of the time, the development of HSR is a direct threat to the air travel industry. In summary, the peculiarities of the public transportation system in general and the airline market, in particular, can pose considerable barriers to the emergence of new LCCs.

References

Albalate, D., Bel, G., & Fageda, X. (2015). Competition and cooperation between high-speed rail and air transportation services in Europe. Journal of Transport Geography, 42, 166–174. doi:10.1016/j.jtrangeo.2014.07.003

Bubalo, B., & Gaggero, A. A. (2015). Low-cost carrier competition and airline service quality in Europe. Transport Policy, 43, 23–31. doi:10.1016/j.tranpol.2015.05.015

Pierce, B. (2016). Web.

Lieshout, R., Malighetti, P., Redondi, R., & Burghouwt, G. (2016). The competitive landscape of air transport in Europe. Journal of Transport Geography, 50, 68–82. doi:10.1016/j.jtrangeo.2015.06.001

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IvyPanda. 2021. "Low-Cost Carriers Competition in Europe." August 24, 2021. https://ivypanda.com/essays/low-cost-carriers-competition-in-europe/.

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