Thursday, July 17, 2008
Posted by D. Daniel Sokol
Harumi Ito (NBER) and Darin Lee (LECG) analyze Domestic Code Sharing, Alliances, and Airfares in the U.S. Airline Industry.
ABSTRACT: This paper examines the impact of domestic codesharing alliances on airfares. Our analysis yields two novel and somewhat surprising findings that have yet to be documented in the literature. First, unlike international codesharing, we find that the overwhelming majority of domestic codeshare itineraries involve a single operating carrier, a phenomenon that we refer to as “virtual” codesharing. Second, we find that these virtual codesharing itineraries are priced lower than itineraries operated and marketed by a single carrier in the same market. We suggest that carriers may be using virtual codesharing—in large part—as a “generic” product to compete for the most price sensitive passengers.