Economics of Transportation 2(2-3), 63-71, 2013
30 Pages Posted: 30 Mar 2011 Last revised: 26 Jun 2017
Date Written: March 24, 2011
A major carrier operates one hub linking multiple non-hub cities. It forms an alliance with a low cost carrier whose nonstop service competes with its one-stop service. The alliance’s joint profit is maximized by withdrawing the competing one-stop (nonstop) service when the major carrier’s operating cost and connecting passengers’ hub-through additional time costs are large (small). The realized alliance is welfare-improving (welfare-decreasing) when these costs are large or small (intermediate). These findings suggest the necessity of alliance regulation. In some regions, the necessity of regulation does not monotonically change as the network size increases.
Keywords: Codeshare alliances, Hub-spoke network carriers, Low cost carriers, Antitrust immunity, Schedule competition
JEL Classification: L13, L93
Suggested Citation: Suggested Citation
Kawamori, Tomohiko and Lin, Ming Hsin, Airline Alliances with Low Cost Carriers (March 24, 2011). Economics of Transportation 2(2-3), 63-71, 2013. Available at SSRN: https://ssrn.com/abstract=1798298 or http://dx.doi.org/10.2139/ssrn.1798298