Code-sharing Agreements and Interconnections in Markets for International Flights

The paper investigates the consequences of code‐sharing agreements among airline firms competing on international routes, where some passengers interconnect to flights originating or terminating at cities not served by foreign airlines. The authors calculate the precise market share captured by flights operated under code sharing. They compare airfares, market shares, profits, and passengers’ welfare before and after the implementation of a code‐sharing agreement and demonstrate that code sharing is Pareto‐improving.