Airline Alliances with Low Cost Carriers

30 Pages Posted: 30 Mar 2011  

Tomohiko Kawamori

Faculty of Economics, Meijo University

Ming Hsin Lin

Osaka University of Economics - Faculty of Economics

Date Written: March 24, 2011

Abstract

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

Kawamori, Tomohiko and Lin, Ming Hsin, Airline Alliances with Low Cost Carriers (March 24, 2011). Available at SSRN: https://ssrn.com/abstract=1798298 or http://dx.doi.org/10.2139/ssrn.1798298

Tomohiko Kawamori

Faculty of Economics, Meijo University ( email )

Japan

Ming Hsin Lin (Contact Author)

Osaka University of Economics - Faculty of Economics ( email )

2-2-8 Osumi
Higashiyokogawa-ku
Osaka
Japan

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