Carve-outs under airline antitrust immunity

This paper offers the first formal economic analysis of carve outs under airline antitrust immunity Carve outs are designed to limit the potential anticompetitive effects of cooperation by alliance partners in hub-to hub markets where they provide overlapping nonstop service While the paper shows that carve-outs are beneficial when the alliance does not involve full integration of the partners operations on the hub to-hub route its key point is that a carve out may be harmful when imposed on a Joint-venture alliance A JV alliance Involves full exploitation of economies of traffic density on the hub-to hub route and a calve out prevents the realization of these benefits While a carve-out may limit anticompetitive incentives on the hub-to hub route welfare may be reduced if the resulting gains are overshadowed by the efficiency loss generated by the carve out (C) 2010 Elsevier B V All rights reserved