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Price Competition between International Airline Alliances


  • Volodymyr Bilotkach


This paper develops a model of price competition between two international airline alliances, with consumers' preferences vertically differentiated by the number of stops. Alliances benefit the interline passengers. Alliances with antitrust immunity do not benefit interline passengers more than those without antitrust immunity, in contrast to the Cournot-type settings. While antitrust immunity leads to higher fares for non-stop travel between hubs of alliance partners, granting it might be necessary to induce consolidation between carriers. Formation of alliances with antitrust immunity is consistent with the proposed model, even though these are likely to decrease individual carriers' profit. © 2005 LSE and the University of Bath

Suggested Citation

  • Volodymyr Bilotkach, 2005. "Price Competition between International Airline Alliances," Journal of Transport Economics and Policy, University of Bath, vol. 39(2), pages 167-190, May.
  • Handle: RePEc:tpe:jtecpo:v:39:y:2005:i:2:p:167-190

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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Brueckner Jan K. & Picard Pierre M., 2013. "Airline Alliances, Carve-Outs and Collusion," Review of Network Economics, De Gruyter, vol. 12(2), pages 211-227, June.
    4. 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.
    5. Rafael Moner Colonques & Ricardo Flores Fillol, 2006. "Strategic Effects Of Airline Alliances," Working Papers. Serie AD 2006-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    6. Alderighi, Marco & Gaggero, Alberto A., 2014. "The effects of global alliances on international flight frequencies: Some evidence from Italy," Journal of Air Transport Management, Elsevier, vol. 39(C), pages 30-33.
    7. repec:eee:ecotra:v:11-12:y:2017:i::p:33-48 is not listed on IDEAS
    8. Bilotkach, Volodymyr, 2007. "Complementary versus semi-complementary airline partnerships," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 381-393, May.
    9. Gayle, Philip G. & Thomas, Tyson, 2016. "Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 178-194.
    10. Achim I. Czerny, 2008. "Code-sharing, price discrimination and welfare losses," WHU Working Paper Series - Economics Group 08-05, WHU - Otto Beisheim School of Management.
    11. Bilotkach, Volodymyr & Hüschelrath, Kai, 2015. "Balancing competition and cooperation: Evidence from transatlantic airline markets," ZEW Discussion Papers 15-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Florent Venayre & Thierry Blayac, 2007. "L'organisation du marché européen des services de transport aérien face à la suppression annoncée des exemptions," Post-Print halshs-00645382, HAL.
    13. Volodymyr Bilotkach & Kai Hüschelrath, 2013. "Airline Alliances, Antitrust Immunity, and Market Foreclosure," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1368-1385, October.
    14. W. Whalen, 2007. "A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(1), pages 39-61, February.
    15. Volodymyr Bilotkach, 2007. "Issues in Network Development by National Airlines: The Case of Ukraine," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 61-80, January-F.
    16. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2013. "Airline consolidation and the distribution of traffic between primary and secondary hubs," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 951-963.
    17. Achim I. Czerny & Peter-J. Jost & Benny Mantin, 2010. "Pricing in Overlapping Transport Networks," WHU Working Paper Series - Economics Group 10-05, WHU - Otto Beisheim School of Management.
    18. 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.
    19. 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.
    20. Gayle Philip G. & Thomas Tyson, 2015. "Product Quality Effects of International Airline Alliances, Antitrust Immunity, and Domestic Mergers," Review of Network Economics, De Gruyter, vol. 14(1), pages 45-74, March.
    21. Bilotkach, Volodymyr & Hüschelrath, Kai, 2012. "Airline alliances and antitrust policy: The role of efficiencies," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 76-84.
    22. Xia, Wenyi & Zhang, Anming, 2016. "High-speed rail and air transport competition and cooperation: A vertical differentiation approach," Transportation Research Part B: Methodological, Elsevier, vol. 94(C), pages 456-481.
    23. Anming Zhang & Yimin Zhang & Joseph A. Clougherty, 2011. "Competition and Regulation in Air Transport," Chapters,in: A Handbook of Transport Economics, chapter 35 Edward Elgar Publishing.

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