Policy and economic implications of liberalizing intercontinental aviation markets: product diffentiation and competition in the South-America and Europe market

Abstract

One of the main characteristic of liberalized aviation markets is the adoption of Hub-and-spoke networks by the majority of airlines. This kind of networks appeared in the airline industry after the deregulation of the us domestic market and they were developed as a consequence of the strategic behavior adopted by airlines. This paper analyzes some policy and economic implications of new potential hubs in the air traffic routes between South-America and Europe as the main consequence of liberalization in this intercontinental market. Special attention is focused on analyzing how competition is going to be carried out under different network scenarios.