Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand

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Abstract
Frequent flyer programs (FFPs) may allow airlines to exercise market power on routes that depart from airports at which they are dominant. Prior research, however, has not disentangled the effects of FFPs from other advantages that dominant airlines may possess. I exploit variation in the extent and scope of U.S. airlines' FFP partnerships with international carriers to evaluate the economic impact of enhancements to FFPs. The results indicate that enhancements to an airline's FFP are associated with increases in its demand on specifically those routes that depart from airports at which it is dominant.

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