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August 14, 2014 When Low-Cost Competitors Show Up, Airlines' Performance Worsens Established airlines might be expected to improve their on-time performance to protect their market share when low-cost competitors enter their markets, but the opposite happens, say Jeffrey T. Prince and Daniel H. Simon of Indiana University. For example, within the first year after Southwest's entry, the proportion of incumbent airlines' flights arriving at least 15 minutes late rose an average of 3.2 percentage points. The performance decline may be a result of airlines' cost-cutting in response to the new threat, the researchers say. SOURCE: Do Incumbents Improve Service Quality in Response to Entry? Evidence from Airlines' On-Time Performance

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