Monday, November 24, 2008
An Empirical Analysis of the Competitive Effects of the Delta/Continental/Northwest Code-Share Alliance
Posted by D. Daniel Sokol
With the Delta/Northwest merger successfully behind us, now is a good time to read An Empirical Analysis of the Competitive Effects of the Delta/Continental/Northwest Code-Share Alliance by Philip G. Gayle of Kansas State University (Economics).
ABSTRACT: The U.S. Department of Transportation (DOT) expressed serious reservations before ultimately approving the Delta/Continental/Northwest code-share alliance. The DOT's main fear was that the alliance could facilitate collusion (explicit or tacit) on prices and/or service levels in the partners' overlapping markets. However, since implementation of the alliance, there has not been a formal empirical analysis of its effects on price and traffic (number of passengers) levels. The main objective of this paper is to conduct such an analysis with a particular focus on testing whether the data are consistent with collusive behavior by the three airlines. The evidence does not suggest that the alliance facilitated collusion on the partners' overlapping routes.