Beyond lotka-volterra: A game-theoretic exploration of two-dimensional airline competition

Korea's airline industry has undergone a transformative period marked by the strategic acquisition of Asiana Airlines (AAR) by Korean Air Lines (KAL). This acquisition is an important moment for the Korean airline industry, as KAL, a full-service carrier (FSC) strengthens its position while facing competition from low-cost carriers (LCCs). The competition between FSCs and LCCs in Korea has shifted due to the coronavirus pandemic, new regulations, and market changes. This study presents a two-stage Lotka–Volterra model integrated with game theory to analyze the competitive dynamics between FSCs and LCCs in Korea. Specifically, this study examines airline competition before and after COVID-19 to reflect evolving market dynamics, in which each carrier's market share is influenced by the others’ strategies. Incorporating game theory makes it possible to evaluate carrier interactions and analyze the effects of competition and cooperation strategies on market equilibrium. The model uncovers shifts in competitive behavior and market dynamics, highlighting the pandemic's influence on airline competition. Although LCCs and FSCs adopted different strategies, the industry's unstable recovery highlights ongoing restructuring and sustainability challenges. The findings of this study provide managerial insights into airline competition and strategic approaches for navigating external shocks.