Low-costcarrier competition and airline service quality in Europe

We investigate in our study, if a higher presence and more efficient operations of Low-Cost Carriers (LCCs) can reduce the service quality of all the flights arriving at an airport. We sample 102 European airports located in 76 metropolitan areas of diverse size from 19 countries on a daily and flight-by-flight basis during the period from April 2011 to December 2012. We construct a panel dataset at the flight code level comprising about 3.5 million observations. We find that LCCs contribute to a reduction of delays for all airlines and flights landing at the observed airport. From the customers’ point of view and regarding level of service we conclude that the presence of LCCs represents a positive externality for an airport. Airport management may therefore consider the proactive increase of LCCs market share in their long-term business strategies.