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Outsourcing and Price Competition: An Empirical Analysis of the Partnerships Between Legacy Carriers and Regional Airlines
Kerry M. Tan1 - Personal Name
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.
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.
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