Airline alliances and the threat of low-cost carriers

The airline industry has been undergoing some interesting developments over the last few years. Liberalisation processes have led to an increase in low-cost carriers and national flag carriers have started to form alliances in order to increase global strength. This research is the first research to analyse the effect of the formation of airline alliances and low-cost carriers for the European interhub market. Through Ordinary Least Squares (OLS) regressions it is found that, in a situation in which alliances reach a certain level of size, the formation of an airline alliance has a positive effect on the fares of flights. Low-cost carriers have a price decreasing effect on the airline fares charged by alliance members.