Assessing the Price Effects of Airline Alliances on Parallel Routes

摘要

The impact of international airline alliances on prices in nonstop hub-to-hub markets is investigated. Analytical results suggest that the formation of alliances has offsetting effects on airfares in these markets. On one hand, the cooperative measures arising from the alliances, such as joint price-setting, contribute to higher airfares. On the other hand, alliance formation contributes to increased passenger traffic and economies of density in these markets, with a resultant downward impact on airfares. The net effect on airfares on these parallel routes is uncertain. Empirical evidence is gathered from the three major alliances (Star Alliance, Oneworld, and SkyTeam) on transatlantic aviation routes between the United States and Europe. Empirical findings show that the impact of the Star and SkyTeam alliances on prices on hub-to-hub routes is insignificant after controlling for other factors, such as the number of carriers selling tickets on a route. Routes between Oneworld alliance hubs, however, have significantly lower business class airfares than do other routes. These results indicate that the impact of alliances on transatlantic hub-to-hub airfares varies depending on the alliance; possibly due to the ability of an alliance to coordinate fares. The major policy implication for the analysis is that alliances should be encouraged, since they benefit connecting passengers and do not have a negative impact on nonstop, hub-to-hub passengers.