The impact of airline alliances: The effects of codesharing on the performance of domestic airlines

Strategic alliances in the form of codesharing between distinct airline entities have become commonplace in international air travel markets. The worldwide liberalization of airlines led the surge in alliance formations. However, it is almost impossible for a single airline to create a truly global network under the current bilateral air service agreements and foreign ownership restrictions. To circumvent these hurdles, airlines have increasingly formed strategic alliances with foreign and domestic airlines as a means of forming global networks. While the influences of codesharing among international carriers have been investigated by past research, studies to examine the firm-level influences of codesharing between a domestic and international airline have been relatively sparse. This research study attempted to fill this gap by studying the influence of codesharing on revenue passenger miles, passenger load factor and the market share of domestic airlines when they have codesharing agreements with international carriers.; The research framework for this study is based on existing theories from strategic management, transaction cost analysis and competitive strategy. Fifteen hypotheses emanating from this framework are presented and they were all focused on the three variables that measure the productivity or performance of the airlines---revenue passenger miles, passenger load factor and market share.; Data for this research study came from three sources. The first one is International Civil Aviation Organization (ICAO) which records airline information such as revenue passenger miles, passenger load factor and market share of both domestic and international airlines. The second source is the Airline Business database which has latest information on alliance activities in the airline industry. The third source is Official Airline Guide database (OAG) which publishes worldwide airline timetable. This was used to cross check the alliance information. Fifty nine domestic airlines were selected from the above sources that represented four continents. Two datasets were created---one with domestic airlines that have codesharing agreements with international airlines and domestic airlines without codesharing agreements with international airlines. Regression analysis was used to analyze the data and statistical program SYSTAT was used to run the tests.; The results indicated that codesharing between domestic airlines and international carriers resulted in increased market share for domestic airlines. However, it was found that in majority of the cases, codesharing didn't influence the other two variables that measure airline productivity: revenue passenger miles and passenger load factor of the domestic airlines.; The results also suggested that codesharing had a positive influence on the load factor of domestic airlines when both the partners are equal in size.