Established airlines might be expected to improve their on-time performance to protect their market share when low-cost competitors enter their markets, but the opposite happens, say Jeffrey T. Prince and Daniel H. Simon of Indiana University. For example, within the first year after Southwest’s entry, the proportion of incumbent airlines’ flights arriving at least 15 minutes late rose an average of 3.2 percentage points. This may be a result of airlines’ cost-cutting in response to the new threat.

(Source: Indiana University School of Public & Environmental Affairs)

Published in Dawn, Economic & Business, September 1st, 2014