Econometric Analysis of Airfare Pricing in Thai Domestic Market with the Presence of Low Cost Carrier Services

摘要

The air transportation community has known so well about the consequences of the marketentry of low cost carriers (LCCs). It effectively sparks the exceptional growth of passengertraffic and simultaneous decrease in the airfare, or so-called “Southwest effect”. In the USand Europe, LCCs have made the air transportation easier and cheaper for everyone. Suchphenomenon may or may not yet exist in Thailand since the LCC business is still in its earlystage of development. Three LCCs are currently offering flights in Thailand. This researchexamined whether the similar global experience has occurred in Thai domestic travel marketafter less than ten years of their establishment. In particular, econometric models wereestimated to understand the casual relationship between various explanatory factors andairfare on the routes with the presence of LCC services. The samples include the two legacyairlines (Thai Airway International and Bangkok Airways) and the three LCCs (Thai AirAsia, One-two-Go and Nok Air). List of candidate factors were guided by extensive literaturereview and adapted to fit the Thai context. Airfare data were collected from airlines’ on-linebooking websites. Based on the descriptive statistics, LCCs tended to charge lower averageairfare per kilometer with relatively wider fluctuation as compared to rather stable pricing bythe legacy airlines. It was also found that passengers tend to pay more if they fly to/fromSuvarnabhumi airport (in Bangkok suburb) rather than Don Muang airport (in Bangkok city)where One-Two-Go and Nok Air offers flights. The estimated econometric models indicatedthat the airfare on Thai domestic routes depends on flying distance, flight frequency, LCCmarket share, population in city pairs, per capita income and last but not least, the presence ofLCCs. Individual LCCs showed different level of impact on airfare decrease. Thai Air Asiahas the strongest influence, followed by One-Two-Go and Nok Air respectively. Perhaps thisis ordered by their competitiveness represented by corresponding capacity in terms of numberof seats and flight frequency. The models were also tested with hold-out samples and showedsatisfactory airfare prediction results.