Strategic formation of airline alliances

Ricardo Flores-Fillol, Rafael Moner-Colonques

    Research output: Contribution to journalArticleResearchpeer-review

    50 Citations (Scopus)

    Abstract

    This paper looks at the endogenous formation of airline alliances by means of a two-stage game where first airlines decide whether to form an alliance and then fares are determined. The authors analyse the effects and the strategic formation of airline alliances when two complementary alliances, following different paths, may be formed to serve a certain city-pair market. Alliances hurt rivals and decrease interline fares. Most interestingly, and contrary to what might be expected, the formation of alliances may be unprofitable in a competitive context. This is likely to happen when competition is significant and economies of traffic density are low.
    Original languageEnglish
    Pages (from-to)427-449
    JournalJournal of Transport Economics and Policy
    Volume41
    Issue number3
    Publication statusPublished - 1 Sep 2007

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