  This paper develops an econometric model of flight delays to investigate the
influence of competition and dominance on the incentives of carriers to
maintain on-time performance. We consider both the route and the airport levels
to inspect the local and global effects of competition, with a unifying
framework to test the hypotheses of 1. airport congestion internalization and
2. the market competition-quality relationship in a single econometric model.
In particular, we examine the impacts of the entry of low cost carriers (LCC)
on the flight delays of incumbent full service carriers in the Brazilian
airline industry. The main results indicate a highly significant effect of
airport congestion self-internalization in parallel with route-level quality
competition. Additionally, the potential competition caused by LCC presence
provokes a global effect that suggests the existence of non-price spillovers of
the LCC entry to non-entered routes.
