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Airline Alliances, Antitrust Immunity and Market Foreclosure

36 Pages Posted: 19 Dec 2010  

Volodymyr Bilotkach

Newcastle Business School

Kai Hüschelrath

Centre for European Economic Research (ZEW)

Date Written: 2010

Abstract

This paper examines the issue of market foreclosure by airline partnerships with antitrust immunity. Overlapping the data on frequency of service and passenger volumes on nonstop routes on the transatlantic airline market with the information on dynamics of airline partnerships, we find evidence consistent with the airlines operating under antitrust immunity refusing to accept connecting passengers from the carriers outside of the partnership at respective hub airports. When an airline partnership is granted antitrust immunity, airlines outside this partnership end up reducing their traffic to the partner airlines’ hub airports by 2.6-8.5 percent (depending on the specification and estimation technique involved). Our results suggest ambiguous welfare effects of antitrust immunity on some markets, where previous studies indicated airline consolidation should benefit consumers.

Keywords: Air transportation, alliances, antitrust immunity, foreclosure

JEL Classification: L41, L93, K21

Suggested Citation

Bilotkach, Volodymyr and Hüschelrath, Kai, Airline Alliances, Antitrust Immunity and Market Foreclosure (2010). ZEW - Centre for European Economic Research Discussion Paper No. 10-083. Available at SSRN: https://ssrn.com/abstract=1727393 or http://dx.doi.org/10.2139/ssrn.1727393

Volodymyr Bilotkach

Newcastle Business School ( email )

208, City Campus East-1
Newcastle upon-Tyne, NE1 8ST
United Kingdom

Kai Hüschelrath (Contact Author)

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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