Can parallel airline alliances be welfare improving? The case of airline-airport vertical agreement.

Parallel airline alliances have negative effects on consumers a priori; however, they can be counteracted if airports may modify the behavior of airlines. In particular, vertical airport–airline agreements allow the airport to influence the competition downstream market, changing the effects of parallel alliances. In this paper, we analyze the effects of parallel alliances in the context of competition between vertical airport–airline pairs competition. We show that under the influence of airports, parallel alliances are welfare improving, and the number of passengers increases, against former studies. These results offer a new brand of analyses to be considered by authorities that evaluate parallel alliances.