Based on a unique panel data set comprising price and passenger data for 207 routes we find robust evidence for effective competition between low cost airlines (LCAs) and rail operators. A rail operator loses at least 7% of its passengers and 8% of its passenger kilometers due to entry by LCAs. We also find evidence of negative price effects of strategic LCA entry in both first class and second class. This demonstrates that LCAs are a significant competitive constraint for rail operators. The relevance of these results for market definition and the future assessment of cooperations between railway operators post-liberalisation is discussed.
Hans Friederiszick (ESMT Competition Analysis, Berlin)