This summer I had the pleasure of working with Professor Qi Ge in the Department of Economics. The project focused on analyzing the effect of the COVID-19 global pandemic, which represents the largest systematic and exogenous shock to the airline industry to date. 

At the beginning of this summer, I inherited a database containing entry and exit announcements made by various airline companies from 2007 to 2015, created by previous research assistants that worked on this project. I helped update this spreadsheet by making a record of all the announcements made since then through October 2020, in the hopes of measuring the effect of the COVID-19 pandemic on the exit announcements. However, the announcements were not systematically documented during the pandemic, thereby resulting in a challenge of assessing the effect of the virus on the airline industry. When deciding whether or not to make an entry or an exit for a given route, an airline company takes into account its competitors’ behaviour as well. This is when we define the concept of entry threat, as the threat posed by a company which operates out of the two endpoints of a route but does not actually operate that route. 

Afterwards, I began a quest of researching existing literature on this topic, enhancing my understanding of entry threat in both the airline industry and outside of it. I then looked at two other phenomena: price dispersion and merger price effect. Price dispersion is more closely correlated with the initial topic of the COVID-19 pandemic, whereas the effect of mergers on price is an interesting topic to explore further in this research project. This summer provided me with invaluable insight on the airline industry and the economics concepts of entry threat and price dispersion, fulfilling my desire to enhance my knowledge in this topic.