Abstract
Political conflicts between countries can disrupt normal functioning of the airline industry, leading to uncertainty and affecting airline demand (Dwyer et al., 2013). Empirical evidence shows that political conflicts have a dampening effect on airline demand (Zhang & Zhang, 2017; Laufer, 2018), and can results in a significant decrease in passenger traffic (Fernandes & Pacheco, 2017).
Airlines respond to political conflicts by implementing various coping strategies, such as route diversification, code-sharing agreements, and fleet renewal (Zuidberg & de Wit, 2020). For example, airlines may shift their focus to alternative destinations or establish partnerships with other carriers to expand their route options when facing reduced demand due to political instability (Button et al., 2016; Corbet et al., 2019). Understanding the impact of growing political conflicts on airline demand and management strategies is crucial as airlines serve as the primary transportation mode for domestic and international tourists.
However, research has largely overlooked the differential impact on distinct airline business models, such as full-service carriers (FSCs) and low-cost carriers (LCCs). This research note aims to address this gap by examining the effects of the China-Korea political conflict, specifically the deployment of the Terminal High Altitude Area Defense (THAAD), on FSCs and LCCs operating in South Korea in terms of flight numbers and seat capacity.