Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, April 10, 2012

Coalitions in the airline industry: an empirical approach

Posted by D. Daniel Sokol

David Bartolini (Department of Economics, Universita Politecnica delle Marche) and Alberto Gaggero (Department of Economics, University of Pavia) write on Coalitions in the airline industry: an empirical approach.

ABSTRACT: This paper conducts an empirical analysis of the determinants of airline alliances. Well established airlines with large passengers' volumes are more likely to participate in an alliance and are also essential for alliance survivability. In line with this finding, older air-lines have a higher probability of being part of an alliance. Airlines operating with high load factors consider alliance participation as a significant alternative to fleet capacity expansion. As their market share grows, alliances become more appealing to airlines. Competitors' decision to enter an alliance tends to have a positive impact on alliance participation. The relatively similar magnitude and effect of the regressors' coefficients across different alliance choices, suggests that the airline's major decision is not to choose a specific alliance, but rather considering whether to enter into an alliance, as a possible strategy within its business model.

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