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Pricing by international airline alliances: A retrospective study

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  • Brueckner, Jan K.
  • Singer, Ethan

Abstract

This study provides further empirical evidence on pricing by international airline alliances. The paper covers a long sample period, which runs from 1997 to 2016, and it supplements the usual USDOT fare data with confidential fare data reported by the foreign alliance partners of US carriers. The empirical results for connecting service match earlier findings, with alliances charging lower fares than nonaligned carriers. In contrast to almost all previous studies, the gateway-to-gateway results imply that, in the latter part of the sample period, granting antitrust immunity to two previously nonaligned carriers is equivalent to removing a competitor, with a consequent increase in fares. However, a simulation based on the results shows that this anticompetitive effect is more than offset by gains to connecting passengers, making alliances beneficial on balance.

Suggested Citation

  • Brueckner, Jan K. & Singer, Ethan, 2019. "Pricing by international airline alliances: A retrospective study," Economics of Transportation, Elsevier, vol. 20(C).
    • Handle: RePEc:eee:ecotra:v:20:y:2019:i:c:s221201221930084x
    DOI: 10.1016/j.ecotra.2019.100139
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    References listed on IDEAS

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    3. Fageda, Xavier & Flores-Fillol, Ricardo & Lin, Ming Hsin, 2020. "Vertical differentiation and airline alliances: The effect of antitrust immunity," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    4. Ivaldi, Marc & Petrova, Milena & Urdanoz, Miguel, 2022. "Airline cooperation effects on airfare distribution: An auction-model-based approach," Transport Policy, Elsevier, vol. 115(C), pages 239-250.
    5. Calzada, Joan & Fageda, Xavier & Safronov, Roman, 2022. "How do global airline alliances affect flight frequency? Evidence from Russia," Journal of Air Transport Management, Elsevier, vol. 98(C).
    6. Yimga, Jules, 2022. "Code-sharing agreements and path quality in the US airline industry," Transport Policy, Elsevier, vol. 116(C), pages 369-385.
    7. Nerja, Adrián, 2023. "Can parallel airline alliances be welfare improving? The case of airline–airport vertical agreement," Transportation Research Part A: Policy and Practice, Elsevier, vol. 167(C).
    8. Menezes Bezerra Sampaio, Raquel & Urdanoz, Miguel, 2022. "Airlines' cooperation in the US domestic market: Measuring the evolution of price gaps," Transportation Research Part A: Policy and Practice, Elsevier, vol. 166(C), pages 424-443.
    9. Marc Ivaldi & Milena J Petrova & Miguel Urdanoz, 2021. "Airline Cooperation Effects on Airfare Distribution: An Auction-model-based Approach," Post-Print hal-03455506, HAL.
    10. Gualini, Andrea & Zou, Li & Dresner, Martin, 2023. "Airline strategies during the pandemic: What worked?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 170(C).
    11. Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.
    12. Lázaro Florido-Benítez, 2023. "A Bibliometric Overview of the International Airports and Airlines ‘IAA’ Topic in Journals and Scientific Community," Logistics, MDPI, vol. 7(3), pages 1-25, June.
    13. Button, Kenneth & Porta, Flavio & Scotti, Davide, 2020. "The role of strategic airline alliances in Africa," MPRA Paper 108265, University Library of Munich, Germany.
    14. Ivaldi, Marc & Petrova, Milena J & Urdanoz, Miguel, 2021. "Airline Cooperation Effects on Airfare Distribution: An Auction-model-based Approach," TSE Working Papers 21-1259, Toulouse School of Economics (TSE).

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