Open skies and open gates

Airline alliances are a global transportation issue which is the subject of increasing attention in the literature. A simple simulation model of air c arrier competition in a network is constructed to examine the economic welf are effects of different levels of alliance between the carriers serving th e network. The simulations confirm that consumers derive benefits from impr oved access to passenger markets. However, in many cases, carriers tend to gain from a limited alliance such as code-sharing. This suggests that close r alliances may be driven by other considerations such as raising barriers to entry or the cross-subsidisation of international routes through greater control of the domestic market.