Como a entrada de novas empresas aéreas do tipo \"Low Cost\" impacta a demanda por viagens? Estudo comparativo entre Azul e Gol

  NECTAR-ITA   & SBPT 10th Brazilian Symposium   on Transport Economics  

Como  a  entrada  de  novas   empresas  aéreas  do  tipo  "ʺLow   Cost"ʺ  impacta  a  demanda  por   viagens?  Estudo  comparativo   entre  Azul  e  Gol Jessica Frazão

Agenda  

•  Low Cost Carriers o  Characteristics o  Effects

•  Passenger demand o  Variables

•  Economic model, hypothesis & econometric model •  Results o  H1: LCC effect on pax o  H2: Gol before and after VRG o  H3: Azul before and after Trip

Low  Cost  Carriers   Characteristics

•  Network, Fleet & Schedule o  o  o  o  o 

Secondary/tertiary airports Point-to-point routes Single fleet type High aircraft utilization High density routes

•  Pricing & Revenue Management o  Competitive fares o  Simple fare rules o  No yield management

•  Distribution & Sales o  Ticketless o  Direct sales o  Non-GDS

•  Interlining, Alliances & FFP o  Not a global alliance member o  No interlining o  Simple frequent flyer program

•  In-flight service o  Single cabin class o  No in-flight service o  Ancillary revenues

Low  Cost  Carriers   Effects

•  Prices

•  Profitability

o  Fare reduction up to 33% (Brueckner et al., 2012)

•  Innovation o  Ticketless à e-Ticketing o  Ancillary revenues à EMD o  Internet sales à NDC

o  The closest to Southwest original model the higher the profitability (Alamdari et al., 2004) o  Spirit Airlines is the most profitable airline in the US (The Wall Street Journal)

What  about  pax  demand?

Passenger  Demand   What  variables  affect  passenger  demand?

As is usual in demand analysis, income and price are included as explanatory variables. (Witt, 1987)

•  Income o  Traffic was sensitive to changes in income (Abrahams, 1983)

•  Price o  Air transport demand turns out to be more sensitive to price changes than the other modes of transport. (Kremers, 2002)

• 

Competition o  The [low-cost] model is legitimized by its low cost and competitive prices. Network effects in the hubbusiness model favor the biggest player with the largest market share. (Bieger, 2007)

Competition  in  Brazil   2002-­‐‑2013

Gol, 2001 (BSBCGH, GIGCGH) •  2003 o  Code share RG JJ •  2005 o  Webjet (WH) entry o  Vasp (VP) bankruptcy o  Varig (RG) bankruptcy •  2006 o  G3 1907 flight accident •  2007 o  JJ 3054 flight accident o  VRG acquisition by G3 •  2008 o  Global financial crisis 2004

Competition  in  Brazil   2002-­‐‑2013

Azul, 2008 (VCPSSA, VCPPOA) •  2009 o  SDU liberalization

•  2010 o  Oceanair re-branding to Avianca Brazil

•  2012 o  AD and Trip (T4) merger o  WH acquisition by G3 o  JJ and Lan (LA) merger 2009

Domestic  Passenger  Demand            Economic  Model

PAX

Income

Blackout

GMInc GMCred FinCrisis Price

LCC Hub-­‐‑and-­‐‑spoke

Infrastructure

Gol Azul

Cost

Competition

Budget Cnx  Inter CS  Majors

Demand  Analysis   Hypothesis

Income

PAX

Price LCC

Infrastructure

Gol Azul

Cost

Competition

Econometric  Model

LCC  model  is  positive  and  significant  to  passenger  demand.

Gol  isolated  effect  on  passenger  demand  is  positive  before   and  after  VRG  acquisition. Azul  isolated  effect  on  passenger  demand  is  positive  and   significant  only  after  Trip  merger.

Data •  ANAC, IBGE, IPEA •  Jan.02 to Dec.13 •  To/from RIO o  SDU and GIG

•  ODs operated by majors o  RG and/or JJ



Results    

H1       Ø LCC effect on passenger demand is positive and significant, ceteris paribus.



Results    

H2       Ø Gol effect on passenger demand is positive and significant, ceteris paribus, before and after VRG acquisition.



Results    

H3       Ø Azul effect on passenger demand is positive and significant, ceteris paribus, only after Trip merger process



Results    

+       Ø Price has an inverse relationship with passenger demand Ø Income per capita has positive effect on passenger demand Ø Credit per capita has a strong positive effect on passenger demand



Results    

+       Ø Domestic connection isolated effect on passenger demand is significant and positive Ø International connection is not a generator of domestic passenger demand itself



Results    

+       Ø Global financial crisis have negatively impacted domestic passenger demand Ø Brazilian aviation crisis was not significant to passenger demand



Results    

+     Ø Codeshare   partnership between Gol had a Varig and negative impact to passenger demand, but not significant Ø Avianca and Webjet isolated effect on passenger demand was not significant during the period studied

LCC  effect  on  pax   1 .5 0 -1.5

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Q/A

Thanks!