Outsourcing and Price Competition : An Empirical Analysis of the Partnerships between Legacy Carriers and Regional Airlines

This paper investigates the determinants and competitive effects of legacy carriers' outsourcing decision with independent regional airlines. Legacy carriers allocate a larger share of their operations to an independent regional airline partner compared to their own fleet or a wholly owned regional airline on routes that experience stronger competition, particularly from low-cost carriers. Moreover, legacy carriers' airfares are lower on routes that they outsource more prominently to an independent regional airline. The results suggest that increased route competition is a motivation for the growing use of independent regional airlines by legacy carriers