IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v103y2017icp432-443.html
   My bibliography  Save this article

Global airline alliances and profitability: A difference-in-difference analysis

Author

Listed:
  • Douglas, Ian
  • Tan, David

Abstract

Alliances and partnerships between airlines are entered into to create competitive advantage, reduce costs, and expand network reach. Three global alliance clusters emerged, with founding partners located in the major geographic regions, and often already involved in bilateral partnerships with other founders. This study examines whether the formation of global airline alliances, with its related expansion of network reach, resulted in an increase in profitability for the founding members. Employing difference-in-difference regressions, this study has found no evidence that the formation of global alliances improved the profitability of founding member airlines, or conferred an economic advantage over airlines that were not founding members. This result is robust across geographic regions, individual global alliances, and alternative event dates. The results of this research suggest that regulators should be less anxious that by sanctioning these closer relationships they are providing major carriers with opportunities for excessive profits.

Suggested Citation

  • Douglas, Ian & Tan, David, 2017. "Global airline alliances and profitability: A difference-in-difference analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 432-443.
    • Handle: RePEc:eee:transa:v:103:y:2017:i:c:p:432-443
    DOI: 10.1016/j.tra.2017.05.024
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856417305402
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2017.05.024?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oum, Tae H. & Park, Jong-Hun & Kim, Kwangsoo & Yu, Chunyan, 2004. "The effect of horizontal alliances on firm productivity and profitability: evidence from the global airline industry," Journal of Business Research, Elsevier, vol. 57(8), pages 844-853, August.
    2. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-545, October.
    3. Wan, Xiang & Zou, Li & Dresner, Martin, 2009. "Assessing the price effects of airline alliances on parallel routes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(4), pages 627-641, July.
    4. Xu Jiang, 2011. "Theoretical perspectives of strategic alliances: a literature review and an integrative framework," International Journal of Information Technology and Management, Inderscience Enterprises Ltd, vol. 10(2/3/4), pages 272-295.
    5. Perry, Monica L. & Sengupta, Sanjit & Krapfel, Robert, 2004. "Effectiveness of horizontal strategic alliances in technologically uncertain environments: are trust and commitment enough?," Journal of Business Research, Elsevier, vol. 57(9), pages 951-956, September.
    6. Philip G. Gayle, 2008. "An Empirical Analysis of the Competitive Effects of the Delta/Continental/Northwest Code-Share Alliance," Journal of Law and Economics, University of Chicago Press, vol. 51(4), pages 743-766, November.
    7. T. K. Das & Bing-Sheng Teng, 2000. "Instabilities of Strategic Alliances: An Internal Tensions Perspective," Organization Science, INFORMS, vol. 11(1), pages 77-101, February.
    8. Ma, Hao, 1998. "Mutual forbearance in international business," Journal of International Management, Elsevier, vol. 4(2), pages 129-147, October.
    9. Achim I. Czerny, 2009. "Code-sharing, Price Discrimination and Welfare Losses," Journal of Transport Economics and Policy, University of Bath, vol. 43(2), pages 193-212, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peng, I-Chin & Lu, Hua-An, 2022. "Coopetition effects among global airline alliances for selected Asian airports," Journal of Air Transport Management, Elsevier, vol. 101(C).
    2. KİRACI Kasim & BAKIR Mahmut, 2020. "Evaluation Of Airlines Performance Using An Integrated Critic And Codas Methodology: The Case Of Star Alliance Member Airlines," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 15(1), pages 83-99, April.
    3. Castiglioni, Marco & Gallego, à ngeles & Galán, José Luis, 2018. "The virtualization of the airline industry: A strategic process," Journal of Air Transport Management, Elsevier, vol. 67(C), pages 134-145.
    4. Ma, Qifei & Jia, Peng & She, Xinran & Haralambides, Hercules & Kuang, Haibo, 2021. "Port integration and regional economic development: Lessons from China," Transport Policy, Elsevier, vol. 110(C), pages 430-439.
    5. Seo Gang-Hoon, 2020. "Competitive Advantages of International Airline Alliances: A Critical Review," HOLISTICA – Journal of Business and Public Administration, Sciendo, vol. 11(1), pages 139-145, April.
    6. Belén Payán-Sánchez & Miguel Pérez-Valls & José Antonio Plaza-Úbeda, 2019. "The Contribution of Global Alliances to Airlines’ Environmental Performance," Sustainability, MDPI, vol. 11(17), pages 1-16, August.
    7. Le, Huubinh B. & Yimga, Jules O., 2023. "Codeshare restrictions as antitrust remedy," Transport Policy, Elsevier, vol. 138(C), pages 17-24.
    8. Gang-Hoon Seo & Munehiko Itoh, 2020. "Perceptions of Customers as Sustained Competitive Advantages of Global Marketing Airline Alliances: A Hybrid Text Mining Approach," Sustainability, MDPI, vol. 12(15), pages 1-15, August.
    9. Kotcharin, Suntichai & Maneenop, Sakkakom & Jaroenjitrkam, Anutchanat, 2023. "The impact of government policy responses on airline stock return during the COVID-19 crisis," Research in Transportation Economics, Elsevier, vol. 99(C).
    10. Zhang, Shengrun & Fuellhart, Kurt & Yang, Wendong & Tang, Xiaowei & Witlox, Frank, 2019. "Factors shaping non-stop airline services in the transatlantic air transport market: 2015–2017," Journal of Transport Geography, Elsevier, vol. 80(C).
    11. Grosche, Tobias & Klophaus, Richard, 2024. "Codesharing and airline partnerships within, between and outside global alliances," Journal of Air Transport Management, Elsevier, vol. 117(C).
    12. Ziedan, Abubakr & Hightower, Ashley & Lima, Luiz & Brakewood, Candace, 2024. "The app or the cap? Which fare innovation affects bus ridership?," Transport Policy, Elsevier, vol. 145(C), pages 247-258.
    13. Hwang, Hyeonjun & Lee, Myoung-jae, 2020. "A simple makeover can increase bus ridership: The story of Tayo bus," Transport Policy, Elsevier, vol. 97(C), pages 103-112.
    14. Jianing Xu & Weidong Li, 2023. "High-Speed Rail and Industrial Agglomeration: Evidence from China’s Urban Agglomerations," Land, MDPI, vol. 12(8), pages 1-18, August.
    15. Seo Gang-Hoon & Itoh Munehiko & Li Zhonghui, 2021. "Strategic Communication and Competitive Advantage: Assessing CEO Letters of Global Airline Alliances," Foundations of Management, Sciendo, vol. 13(1), pages 57-72, January.
    16. Klophaus, Richard & Lordan, Oriol, 2018. "Codesharing network vulnerability of global airline alliances," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 1-10.
    17. Wang, Kun & Tsui, Wai Hong Kan & Li, Lan-Bing & Lei, Zheng & Fu, Xiaowen, 2020. "Entry pattern of low-cost carriers in New Zealand - The impact of domestic and trans-Tasman market factors," Transport Policy, Elsevier, vol. 93(C), pages 36-45.
    18. Bock, Sebastian & Mantin, Benny & Niemeier, Hans-Martin & Forsyth, Peter John, 2020. "Bankruptcy in international vs domestic markets: Evidence from the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 728-743.
    19. 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.
    20. Kuo, Pei-Fen & Shen, Chung-Wei & Chiu, Chui-Sheng, 2021. "The impact of large-scale events: A difference-in-difference model for a Pokémon go safari zone event in Tainan and its effect on bikeshare systems," Transportation Research Part A: Policy and Practice, Elsevier, vol. 149(C), pages 283-299.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Czerny, Achim I. & Jost, Peter-J. & Lang, Hao & Mantin, Benny, 2021. "Carrier collaboration with endogenous networks: Or, the limits of what carrier collaboration can achieve under antitrust immunity," Journal of Air Transport Management, Elsevier, vol. 94(C).
    2. 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.
    3. Volodymyr Bilotkach, 2019. "Airline Partnerships, Antitrust Immunity, and Joint Ventures: What We Know and What I Think We Would Like to Know," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 37-60, February.
    4. Min, Hokey & Joo, Seong-Jong, 2016. "A comparative performance analysis of airline strategic alliances using data envelopment analysis," Journal of Air Transport Management, Elsevier, vol. 52(C), pages 99-110.
    5. Peng, I-Chin & Lu, Hua-An, 2022. "Coopetition effects among global airline alliances for selected Asian airports," Journal of Air Transport Management, Elsevier, vol. 101(C).
    6. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2015. "The effect of code-share agreements on the temporal profile of airline fares," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 42-54.
    7. Adler, Nicole & Hanany, Eran, 2016. "Regulating inter-firm agreements: The case of airline codesharing in parallel networks," Transportation Research Part B: Methodological, Elsevier, vol. 84(C), pages 31-54.
    8. Yimga, Jules, 2018. "Domestic code-sharing agreements and on-time performance: Evidence from the US airline industry," Transport Policy, Elsevier, vol. 71(C), pages 14-27.
    9. Gayle, Philip G. & Xie, Xin, 2019. "Firms’ markup, cost, and price changes when policymakers permit collusion: Does antitrust immunity matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 680-707.
    10. Zou, Li & Chen, Xueqian, 2017. "The effect of code-sharing alliances on airline profitability," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 50-57.
    11. Adler, Nicole & Mantin, Benny, 2015. "Government and company contracts: The effect on service and prices in international airline markets," Economics of Transportation, Elsevier, vol. 4(3), pages 166-177.
    12. Le, Huubinh B. & Yimga, Jules O., 2023. "Codeshare restrictions as antitrust remedy," Transport Policy, Elsevier, vol. 138(C), pages 17-24.
    13. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    14. Jiang, Changmin & Zhang, Anming, 2014. "Effects of high-speed rail and airline cooperation under hub airport capacity constraint," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 33-49.
    15. Brueckner, Jan K. & Proost, Stef, 2010. "Carve-outs under airline antitrust immunity," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 657-668, November.
    16. Holger Patzelt & Dean A. Shepherd, 2008. "The Decision to Persist with Underperforming Alliances: The Role of Trust and Control," Journal of Management Studies, Wiley Blackwell, vol. 45(7), pages 1217-1243, November.
    17. Brueckner, Jan K. & Lee, Darin & Singer, Ethan S., 2013. "Airline competition and domestic US airfares: A comprehensivereappraisal," Economics of Transportation, Elsevier, vol. 2(1), pages 1-17.
    18. Yimga, Jules O., 2017. "Airline code-sharing and its effects on on-time performance," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 76-90.
    19. Czerny, Achim I. & van den Berg, Vincent A.C. & Verhoef, Erik T., 2016. "Carrier collaboration with endogenous fleets and load factors when networks are complementary," Transportation Research Part B: Methodological, Elsevier, vol. 94(C), pages 285-297.
    20. Yu, Ming-Miin & Rakshit, Ipsita, 2024. "How to establish input and output targets for airlines with heterogeneous production technologies: A nash bargaining DEA approach within the meta-frontier framework," Journal of Air Transport Management, Elsevier, vol. 116(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:103:y:2017:i:c:p:432-443. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.