Rapid capacity expansions and failure: A trap for new airline?
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.
capacity, expansion, airline, entrant, failure, survival
Strategic Management Policy | Transportation
Strategy and Organisation
Transportation Research Part E: Logistics and Transportation Review
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. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4599