Abstract for: Market development of airline companies: A system dynamics view on strategic movements

The airline industry is characterized by strong dynamic developments. Concentrating on the smallest possible market for an airline company to develop, in this paper we want to demonstrate the effects of entry and exit on city pairs, i.e. the routes between two airports, by presenting a System Dynamics model to simulate and analyze strategic movements on airline markets. By varying the preconditions, e.g. distinct business models and initial entry setups and calibrated with the data of German Antitrust law suit between Lufthansa and Germania, we will show the various consequences of different market scenarios, comparing the results with hypotheses from a literature review. Additionally, we will show the effectiveness of a policy of predatory pricing against market entry under different conditions.