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Outsourcing and Price Competition: An Empirical Analysis of the Partnerships Between Legacy Carriers and Regional Airlines

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  • Kerry M. Tan

    (Loyola University Maryland)

Abstract

This paper investigates the determinants and competitive effects of legacy carriers’ outsourcing decision with independent regional airlines. Legacy carriers allocate a larger share of their operations to an independent regional airline partner compared to their own fleet or a wholly owned regional airline on routes that experience stronger competition, particularly from low-cost carriers. Moreover, legacy carriers’ airfares are lower on routes that they outsource more prominently to an independent regional airline. The results suggest that increased route competition is a motivation for the growing use of independent regional airlines by legacy carriers.

Suggested Citation

  • Kerry M. Tan, 2018. "Outsourcing and Price Competition: An Empirical Analysis of the Partnerships Between Legacy Carriers and Regional Airlines," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(2), pages 275-294, September.
    • Handle: RePEc:kap:revind:v:53:y:2018:i:2:d:10.1007_s11151-017-9610-z
    DOI: 10.1007/s11151-017-9610-z
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    Cited by:

    1. Donggeun Kim & Myongjin Kim & Kerry Tan, 2021. "Tacit collusion and price dispersion in the presence of Southwest Airlines," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 3-32, July.
    2. Peng Du & Lei Xu & Rou Luo & Mingzhu Hou, 2024. "Competing with Low Cost Carrier in a Sustainable Environment: Airline Ticket Pricing, Carbon Trading, and Market Power Structure," Sustainability, MDPI, vol. 16(2), pages 1-17, January.
    3. Lei He & Georgia Kosmopoulou, 2021. "Subcontracting Network Formation Among U.S. Airline Carriers," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 817-853, December.
    4. Lei He & Myongjin Kim & Qihong Liu, 2022. "Competitive response to unbundled services: An empirical look at Spirit Airlines," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 115-145, February.

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