Switching Costs in the Brazilian Airline Sector

• Published in: International journal of the economics of business Vol. 27; no. 3; pp. 321 - 339
• Main Authors: Resende, Marcelo, Amorim, Daniel Penido, Valente, Pedro O.
• Format: Journal Article
• Language: English
• Published: Abingdon Routledge 01-09-2020; Taylor & Francis Ltd
• Subjects: air transport; Air transportation industry; Airline industry; Airlines; Competitors; frequent flyer programs; industrial organization; Switching costs
• ISSN: 1357-1516; 1466-1829
• DOI: 10.1080/13571516.2020.1787746

This paper calculates the switching costs in the context of the Brazilian airline industry by considering an indirect approach, and econometrically evaluates its determinants during the 2005-2017 period. Evidence suggests non-negligible switching costs that display a decreasing trend over time, which is consistent with an increase in the competition in the sector, as also exhibited in other countries. An instrumental variables estimation suggests that variables referring to the number of flights, a frequent flyer program and the entry/presence of competitors play a role in determining the magnitude of switching costs.