Airline Partnerships, Antitrust Immunity, and Joint Ventures: What We Know and What I Think We Would Like to Know

Abstract

This paper offers an overview of the state of research on airline partnerships and related issues: antitrust immunity, and joint ventures. While at a high level the potential pro-and anti-competitive effects of various forms of airline partnerships are well understood; a number of important gaps in our knowledge remain. For instance, academic research has yet to develop a clear way to differentiate between codesharing with and without immunity, and joint ventures with the use of the conventional IO modelling apparatus. Developing such theoretical models can be useful for policy makers. Future empirical research should focus on understanding the effects of joint ventures-as well as evaluating efficiency benefits of airline partnerships-and determining whether multimarket contact and repeated interaction could have led to the competitive environment that is conducive to tacit collusion.

Competitive Effects of Joint Ventures in the International Airline Industry

“…To the best of the authors' knowledge, the outcome that the airfares of online flights in behind-to-gateway markets get higher after forming a JV has not yet been identified in previous empirical studies (1,7). Papers by Calzaretta et al and Brueckner et al mainly show that, as airline carriers improve their cooperation, airfares for the interline or codeshare flights fall (8,9).…”

“…Many members of the three major airline alliances (Star, SkyTeam, and Oneworld) have further expanded cooperation by forming JVs. In 2016, 81% of the travelers who flew between the U.S. and Europe used an airplane operated by a JV (1). More recently, there is a new wave of JVs in the transpacific markets.…”

“…Except for mergers, JVs are considered the highest level of cooperation in the international airline industry (1). Compared with other types of cooperation (e.g., codeshare agreements), one unique feature of JVs is that they require partners to jointly determine airfares and operate as a single carrier in the relevant markets.…”

“…This so-called double marginalization problem leads to inefficiently high airfares of codeshare flights, which hurt both consumers and carriers in the connecting markets. Therefore, the government regulations on JVs seem to show a consistent pattern: ''approving JVs unless carriers' networks overlap too much'' (1).…”

Spatially Characterizing Major Airline Alliances: A Network Analysis

“…Market-related airline alliance studies have mainly focused on the traffic impact of member airlines [6], the advantages of code-sharing [7,8], the collaborative relationships within airline alliances, and the competitive relationships among airline alliances [9,10]; however, the studies have neglected to investigate the connectivity of airports within an airline alliance. Connectivity in the aviation market plays an essential role in linking one airport to another within a market.…”