Airline Alliances and Service Quality

37 Pages Posted: 31 Oct 2018

See all articles by Jan K. Brueckner

Jan K. Brueckner

University of California, Irvine - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Ricardo Flores-Fillol

Universitat Rovira i Virgili (URV)

Date Written: 2018

Abstract

Convenient scheduling, characterized by adequate flight frequency, is the main quality attribute for airline services. However, the effect of airline alliances on this important dimension of service quality has received almost no attention in the literature. This paper fills this gap by providing such an analysis in a model where flight frequency affects schedule delay and connecting layover time. While an alliance raises service quality when layover time has zero cost, the reverse occurs when layover time is costly. The source of this surprising result is that costly layovers eliminate the additive structure of the full trip price, which consists of the sum of the subfares plus the weighted sum of the reciprocal flight frequencies when layover cost is zero. The paper also shows that nonaligned carriers adjust frequencies to suit passenger preferences in business and leisure markets, while an alliance is less responsive to such preference differences. With hub-airport congestion, greater internalization by allied carriers tends to reduce frequency, but this force is not enough to overturn the positive alliance effect in the low-cost layover case.

Keywords: service quality, alliance, double marginalization, congestion

JEL Classification: D430, L130, L400, L930, R400

Suggested Citation

Brueckner, Jan K. and Flores-Fillol, Ricardo, Airline Alliances and Service Quality (2018). CESifo Working Paper No. 7226. Available at SSRN: https://ssrn.com/abstract=3275400

Jan K. Brueckner (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ricardo Flores-Fillol

Universitat Rovira i Virgili (URV) ( email )

Dept. d'Economia (office 310), FCEE
Avinguda de la Universitat 1
Reus, Tarragona 43204
Spain
+34 977 75 98 51 (Phone)
+34 977 75 98 10 (Fax)

HOME PAGE: http://gandalf.fcee.urv.es/professors/RicardoFlores

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