Effects of Strategic Airline Alliances on Air Transport Market Competition: An Empirical Analysis

Abstract

While alliances continue to be an important tool for airlines as they seek to expand their networks to compete more effectively with other larger networks, the effects of alliances and market liberalization on air transport market competition and airline performance have received relatively little attention. This research empirically investigates the effects of liberalization, and airline alliances, on airline competition. The analysis is based on 5,021 data sets focusing on 197 routes between the gateway cities of the major airlines' home countries. Findings show that airline passenger market share and route network share are significantly increased with increasing alliance activity. Also, airlines have a greater number of flights, passengers and passenger seats on routes for which they are involved in higher levels of cooperation and operate in more liberal markets. This suggests that multiple cooperation structures contribute more than bilateral airline service agreements to the overcoming of restrictive regulatory frameworks, enabling more effective competition.