The benefits of codesharing and antitrust immunity for international passengers, with an application to the Star alliance

This paper summarizes and extends the empirical findings of previous research by the author, which analyzed the effect of airline cooperation on the level of interline fares paid by international passengers. The analysis focuses on three measures of cooperation: alliance membership, codesharing, and antitrust immunity. The results show that, together, these three forms of cooperation lead to a substantial 27 percent reduction in interline fares. The paper then computes the aggregate benefits from antitrust immunity and codesharing for the Star Alliance's interline passengers. The immunity enjoyed by the Star partners generated an aggregate benefit of about $80 million per year for interline passengers in 1999. Codesharing among Star partners yielded a further annual benefit of around $20 million. Moreover, if cooperation within the Star Alliance had expanded through an extension of antitrust immunity to those 1999 partners who did not enjoy it, then $20 million of additional benefits would have been generated. (C) 2002 Elsevier Science Ltd. All rights reserved.