Abstract for: Modelling open skies agreements and air passenger competition

This work aims to study competitive airline behavior, regarding pricing and supply decisions, and how it adjusts to various structural assumptions, such as the existence of capacity expansion delays, by employing system dynamics simulation techniques. Results show that, in a competitive environment, the airline with the most aggressive market share expansion strategy would start transporting more passengers and sustained an advantage for the first 15 years, of a 60-year horizon, only to be undertaken by its competitor and end up sharing 50% of the market at the end. Furthermore, both airlines undercut their fares to the point of reaching their operating unit costs, which goes in line with a Bertrand competition behavior (Silva and Verhoef 2013), creating benefits to consumers.