Alliances can involve commuter carriers, domestic carriers, foreign carriers, or a combination. Most of our experience with alliances between major airlines has been in the international marketplace, between airlines of different nationalities who may be restricted from serving each other's domestic markets. Alliances between major U.S. carriers, as distinct from alliances between hub carriers and commuter carriers that serve those hubs, are a relatively recent phenomenon. Other airlines, specifically American Airlines and US Airways, and United Airlines and Delta Airlines, also considered alliances last year, but appear to have shelved plans to code-share. Our analysis of a domestic alliance will be similar in most respects to our analysis of international alliances we have examined, so with a few exceptions that I'll point out, what I am about to say will apply in either situation.
Alliances involving code-sharing are in many respects the most controversial.
Code sharing agreements also have the potential to be anticompetitive. They can result in market allocation, capacity limitations, higher fares, or foreclosure of rivals from markets, all to the injury of consumers. The ability to distinguish the latter from the former is crucial for aviation policy makers and antitrust enforcement authorities. In assessing the effect on competition, the first necessity is to define the relevant market, which may be one city-pair route, or a set of such routes, and then to measure that market in terms of its participants and concentration. From an antitrust viewpoint, the greatest threat to competition comes when two of very few airlines that compete in a market enter into a code-sharing agreement in that market.