April 13, 2011
Airline Alliances with Low Cost Carriers
Blog readers may be interested in reading Tomohiko Kawamori and Ming Hsin Lin's working paper, Airline Alliances with Low Cost Carriers (Working Paper Mar. 24, 2011) (available from SSRN here). From the abstract:
A major carrier operates one hub linking multiple non-hub cities. It forms an alliance with a low cost carrier whose nonstop service competes with its one-stop service. The alliance’s joint profit is maximized by withdrawing the competing one-stop (nonstop) service when the major carrier’s operating cost and connecting passengers’ hub-through additional time costs are large (small). The realized alliance is welfare-improving (welfare-decreasing) when these costs are large or small (intermediate). These findings suggest the necessity of alliance regulation. In some regions, the necessity of regulation does not monotonically change as the network size increases.
April 11, 2011
Havel on EU ETS
A story from yesterday's edition of the New York Times featured commentary by Professor Brian Havel on the European Union's plans to apply its Emissions Trading Scheme to aviation. See James Kanter, European Pollution Regulations Face Challenge, N.Y. Times, Apr. 10, 2011 (available here). In it, Havel noted that "the EU regulation is an overreach" which "could set a troubling precedent where other States could begin imposing new taxes and charges on foreign airlines for activities which occur beyond their airspace." Havel also expressed doubts that the legal challenge to the pending decision on the regulation by the European Court of Justice would favor the airlines.