Alliances as an Integrating Market Instrument: A Case Study of Airline Alliances

Attiat F. Ott () and Oswaldo J. Patino ()
Additional contact information
Attiat F. Ott: Department of Economics, Clark University, USA
Oswaldo J. Patino: Department of Economics, Clark University, USA

Review of Economics & Finance, 2011, vol. 1, 104-118

Abstract: This paper offers a novel way of looking at airline alliances by integrating the concept into the study of regional arrangements like common markets or free trade areas. Not unlike a country wishing to join an established common market, an airline seeking admission to an airline alliance seeks to enhance access to the market. Currently there are three major airline alliances: Star Alliance, Sky Team and One World. Given that access enhances potential for returns, the paper models and empirically tests the choice of an air carrier as to whether or not to join an alliance, and if it were to join which alliance. Using the US Department of Transportation Origin and Destination Survey for 2003 and 2008, a latent choice model is estimated. From the Logit estimates the predicted alliance membership rose from 0.39 to 0.62 signifying the attractiveness of this formation. Given that there exists more than one alliance to choose from, using the portfolio principles we ranked the alliances in terms of returns and volatility of return. The results suggest that many international carriers seem to have fared extremely well whereas US carriers did not.

Keywords: Airline alliances; Choice model; Portfolio principles of returns and risk (search for similar items in EconPapers)
JEL-codes: F15 L11 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.bapress.ca/Journal/Alliances%20as%20an% ... line%20Alliances.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bap:journl:110109

Ordering information: This journal article can be ordered from
17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada

Access Statistics for this article

Review of Economics & Finance is currently edited by H. Carlson

More articles in Review of Economics & Finance from Better Advances Press, Canada 17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada.
Bibliographic data for series maintained by Carlson ( this e-mail address is bad, please contact ).