The Competition of Combination and All-cargo Airlines in a Deregulated General Air Cargo Market

Under deregulation, the competition for air general cargo business between all-cargo airlines and combination airlines is foreseeable. This paper proposes a model structure that analyzes the pricing and service strategies between two kinds of carriers within a competitive framework, and evaluates airline profits based on game theory and a microeconomic theory of airline behavior. The model is applied to a case study, with empirical airline operation cost data, and acquire some results. The results show that combination carriers mostly have significant dominance over the market and might expand their freight aircraft fleets for competition. All-cargo airlines could expand their operation via better service in the markets, especially where combination airlines provide insufficient shipping capability for air cargo service.