Empirical analysis of the airline industry on the U.S.-China route

This dissertation studies the airline industry on the route between the U.S. and China by examining various issues including market liberalization, airline alliances, and airline mergers. The …rst chapter focuses on the liberalization in the airline industry between the U.S. and China. As a highly regulated industry, the airline industry has been of interest to policymakers who try to understand the impact and magnitude of airline market restrictions. The aviation agreement between the U.S. and China restricts the routes as well as the number of carriers and ‡ights permitted on these routes. An amendment in 2007 allowed additional routes, and introduced new carriers to participate in these routes. This paper examines detailed transaction data on passenger aviation over a six-year period, and analyzes the impact of the sequential introduction of nonstop routes. In this paper, I also estimate a structural econometric model of demand and supply for air travel, which allows me to conduct counterfactual analysis. The second chapter studies alliances between carriers from the U.S. and China. As international airlines have expanded in recent decades, increasing demand for international air travel between the U.S. and China has prompted U.S. airlines to forge alliances with their overseas counterparts in China to extend the reach of their networks. An airline alliance is an agreement between two or more airlines to cooperate on a substantial level, including unlimited code-sharing between partners. Code-sharing is usually associated with changes in airfares and tra¢ c volume for related routes. In theory, code-sharing should allow providers