Entry patterns of low‐cost carriers in Hong Kong and implications to the regional market

Abstract

This study aims to provide a better understanding of Asia’s lowcost carriers (LCCs) by empirically analysing their route entry patterns in Hong Kong. Two alternative models have been tested, namely a standard probit model and a generalized least squares estimation. Consistent findings from the two models suggest that LCCs in Asia have a clear preference for high density routes, and the dominance of incumbent full service airlines (FSAs) and the lack of secondary airports are not critical to the growth of LCCs. However, government regulations and airport access are main impediment factors. Despite the adoption of long-distance lowcost models by the region’s airlines, geographic distance still plays an important role in LCCs’ entry decisions. For the growth of low-cost travel and associated benefits in the tourism industry and overall economy, it is important for governments in the region to liberalize aviation markets, provide sufficient airport capacity, and promote efficient allocation of airport slots.