A duopolistic framework for ancillary service strategies of dual airlines

Abstract

In the face of the fierce competition in the air passenger industry caused by the rapid development of low-cost airlines, improving service quality has become an important strategic choice for airlines to improve their competitive edge. Based on a single route market, this paper establishes a duopoly model of price and service competition between two airlines of different scales, and studies three strategic frameworks of ancillary service provision: (1) the small-scale airline provides ancillary services, the large-scale airline does not provide; (2) the large-scale airline provides, the small-scale airline does not provide; (3) both airlines provide at the same time, in order to offer theoretical basis for the decision of ancillary service of airlines.