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. © 2004 Elsevier Ltd. All rights reserved.