An Empirical Analysis of the Competitive Effects of the Delta/Continental/Northwest Code-Share Alliance

The U.S. Department of Transportation (DOT) expressed serious reservations before ultimately approving the Delta/Continental/Northwest code-share alliance. The DOT's main fear was that the alliance could facilitate collusion (explicit or tacit) on prices and/or service levels in the partners' overlapping markets. However, since implementation of the alliance, there has not been a formal empirical analysis of its effects on price and traffic (number of passengers) levels. The main objective of this paper is to conduct such an analysis with a particular focus on testing whether the data are consistent with collusive behavior by the three airlines. The evidence does not suggest that the alliance facilitated collusion on the partners' overlapping routes. (c) 2008 by The University of Chicago. All rights reserved..