Impact of Aircraft Size and Seat Availability on Airlines’ Demand and Market Share in Duopoly Markets

We build a nested logit model to study the roles of aircraft size, together with service frequency, seat availability and fare, in airlines’ market share and total demand in non-stop duopoly markets. We find that airlines can obtain higher returns in market share from increasing service frequency than from increasing aircraft size, and our study confirms an S-curve effect of service frequency on airlines’ market share. We find that the available capacity per flight––net of capacity absorbed by connecting passengers––affects market share in the same manner whether it is derived from a larger proportion of a smaller aircraft or smaller proportion of a larger one.