The Effects of Airline Codesharing Agreements on Firm Conduct and International Air Fares

Codesharing has become an essential tool for airline alliances. This paper investigates the effects of codesharing on firm conduct and air fares, focusing on oligopolistic interaction between airlines, and measures the impacts of a codesharing agreement between non-market leaders on the market leader's price and volume. An analytical model is developed and applied to a panel data of fifty-seven transpacific routes for the 1982-92 period. A complementary codesharing is found to reduce the leader's price by $83 and increase annual volume by 10,052 passengers