Rapid capacity expansions and failure: A trap for new airline?

Author

Terence Ping Ching FAN, Singapore Management UniversityFollow
Alex Tai Loong TAN, University of Western Australia
Xuesong GENG, Singapore Management UniversityFollow

Publication Type

Journal Article

Publication Date

1-2014

Abstract

This paper investigates whether fast capacity expansions as a means to narrow cost differentials between a de novo airline entrant and established incumbents helps or hinders the survival of the entrant. Evidence from a longitudinal sample of new entrants in the European passenger airline industry showed that these firms exhibited higher failure risks after rapidly expanding capacity. Further, high product market overlap with an established incumbent reduced the probability of new entrants undertaking such expansions, in turn reducing the probability of failure.

Keywords

capacity, expansion, airline, entrant, failure, survival

Discipline

Strategic Management Policy | Transportation

Research Areas

Strategy and Organisation

Publication

Transportation Research Part E: Logistics and Transportation Review

Volume

61

Issue

1

First Page

176

Last Page

191

ISSN

1366-5545

Identifier

10.1016/j.tre.2013.11.002

Publisher

Elsevier

Citation

FAN, Terence Ping Ching; TAN, Alex Tai Loong; and GENG, Xuesong. Rapid capacity expansions and failure: A trap for new airline?. (2014). Transportation Research Part E: Logistics and Transportation Review. 61, (1), 176-191.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4599

Additional URL

https://doi.org/10.1016/j.tre.2013.11.002