Econometric modeling of route-level market share dynamics in Nigeria’s domestic airline sector

Abstract

This study investigates the determinants of route-level market share dynamics in Nigeria’s domestic airline sector using quarterly panel data from 2005 to 2023. Employing cointegration and error correction models (ECM), supported by robustness checks with VAR and VECM, the analysis evaluates the long- and short-run impacts of fare levels, competition, flight frequency, and passenger volumes on airline market share. The results show that fare has limited explanatory power, while frequency, passenger demand, and competitive intensity are the primary drivers of market share. Short-run fluctuations are rapidly corrected, with approximately 60 % of deviations from equilibrium adjusted each period. These findings align with Nigeria's aviation history, where fare undercutting strategies contributed to the collapse of carriers such as Arik and Bellview. At the same time, service frequency and reliability underpinned the rise of dominant airlines like Air Peace and Ibom Air. Comparative evidence from India, Brazil, and Indonesia further confirms that in deregulated but infrastructure-constrained markets, frequency and network expansion consistently outweigh fare competition. The study contributes empirically by offering one of the few route-level econometric analyses of Africa's domestic airline markets, theoretically by situating frequency effects and demand theory, and practically by providing policy guidance. Findings include prioritizing operational reliability over fare wars, strengthening financial oversight to reduce unsustainable competition, and leveraging the Single African Air Transport Market (SAATM) to scale Nigerian carriers regionally. Overall, the results underscore that market share alone is insufficient for sustainability; profitability, efficiency, and strategic expansion must complement market presence to ensure the long-term viability of Nigerian airlines.