IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v47y2011i3p315-332.html
   My bibliography  Save this article

Assessing the price effects of airline alliances on complementary routes

Author

Listed:
  • Zou, Li
  • Oum, Tae H.
  • Yu, Chunyan

Abstract

This paper investigates the impacts of complementary alliance on airfares. The conventional wisdom argues that complementary airline alliances reduce airfares for passengers on the flow-through routes as a result of the elimination of double marginalization and efficiency gain. On the other hand, since complementary alliances help improve connecting services through one-stop check-in, better schedule coordination, etc., passengers are willing to pay higher prices for the enhanced services. That is, complementary alliances have both positive and negative effects on airfares for flow-through tickets that counteract each other. The net impact, therefore, is uncertain, a priori. Our theoretical model shows that the overall effects of complementary alliances on airfares depend on the relative strengths of the airfare reducing effects due to cooperative pricing setting and the increased willingness to pay for services improvements. Our empirical analysis based on data from the North trans-Pacific markets in October 2007 finds that member airlines of Star Alliance and Skyteam Alliance appear to charge significantly higher prices for through-tickets than the sum of segment fares on complementary routes, whereas for oneworld Alliance members, the upward and downward effects on airfares seem to counterbalance each other. Moreover, the price markup for through ticket is higher for business passengers than for leisure passengers.

Suggested Citation

  • Zou, Li & Oum, Tae H. & Yu, Chunyan, 2011. "Assessing the price effects of airline alliances on complementary routes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(3), pages 315-332, May.
  • Handle: RePEc:eee:transe:v:47:y:2011:i:3:p:315-332
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554510001080
    Download Restriction: Full text for ScienceDirect subscribers only

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

    Citations

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


    Cited by:

    1. 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.
    2. 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.
    3. repec:eee:transa:v:111:y:2018:i:c:p:1-10 is not listed on IDEAS
    4. 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.
    5. Merkert, Rico & Morrell, Peter S., 2012. "Mergers and acquisitions in aviation – Management and economic perspectives on the size of airlines," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 853-862.

    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:transe:v:47:y:2011:i:3:p:315-332. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.