Impact of US Low Cost Carriers Entrance to the Airline Market in Colombia, South America

This study researched the impact of US low cost carriers’ entrance to the airline market in Colombia, South America. The study analyzed the overall market share between Florida and Colombia after U.S. low cost carriers entered the market and finds that the market share for the Colombian flag carrier Avianca and U.S. legacy carrier American Airlines, who used to dominate this market, has decreased; however, the total passenger demand has increased. This increase in passenger demand can be attributed in part to U.S. low cost carriers opening new city pairs and allowing passengers to fly direct to the U.S. from their hometown at a lower cost.

Socio-economic variables, such as Colombian population in the U.S., GDP, currency exchange rate, and unemployment, are explored. A demand equation is formulated; this equation indicates that a relationship exists between passenger demand for the market in question and GDP, currency exchange rate, seasonality, and airfare.