The paper investigates competition between the two incumbent legacy carriers on the New Zealand and Tasman routes, and the extent to which their pricing is constrained by new entry from a low cost carrier and a Fifth Freedom carrier. Price and other data on 1,001 flights on nineteen routes observed in 2004 and 2005 are analysed. The main findings of the paper are: (i) that routes on which Qantas competed with Air New Zealand (Air NZ) tended to have air fares around 20 per cent lower than routes served only by Air NZ; (ii) the entrants Emirates and Pacific Blue offered much lower fares across the Tasman, but yet could not achieve substantial market shares, implying that; (iii) these airlines do not offer much competitive constraint on the pricing of the legacy carriers.
Abstract