Complementary vs Semi-Complementary Airline Partnerships
18 Pages Posted: 3 Nov 2005
Date Written: October 2005
As low-cost airlines or carriers excluded from international markets by regulation may seek to expand internationally in an indirect way through code-sharing agreements, they can choose partner airlines from among domestic or international carriers. The former case results in a semi-complementary partnership, while in the latter a classic complementary alliance is formed. This paper compares welfare properties of the two types of partnerships under economies of traffic density. Semi-complementary partnerships yield higher total welfare (but not necessarily lower prices) when economies of traffic density are strong, demand is more price-sensitive, or where a carrier feeding domestic traffic to international routes is a lower-cost one.
Keywords: Code-sharing, airline alliances, complementary alliances, low-cost airlines
JEL Classification: D43, D49, L13, L29, L40, L93
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