The foregoing analysis can usefully inform competition policy with regard to alliances in a number of ways. First, empirical analysis raises questions as to whether immunized alliances are continuing to deliver unequivocal benefits to consumers. A period of beneficial market performance, followed by a spate of lower or even negative benefits resulting from policy initiatives, is not unusual for restructuring industries. For example, much of the consolidation that occurred at the outset of electricity restructuring in the United Sates likely reflected a market-driven decrease in the number of firms which had previously been determined by regulatory flat. Subsequent consolidation, however, tended to raise more concrete market power problems. A similar effect is likely in play for airline alliances as they continue to expand. Policymakers should be sensitive to this pattern in evaluating requests for codesharing and immunity, giving fair weight to empirical work that assesses both the costs and benefits of immunization.
A second implication of the foregoing analysis is that policymakers must wrestle with a number of complex factors that affect the "net" calculation of alliance-related benefits. Based on the foregoing assessment, there are five major factors that are important to consider in evaluating the expansion of immunized alliances. The first factor is the cost saving associated with coordinated operations of alliance members and the attendant fare reductions that might naturally arise as alliance members more fully internalize the complementary nature of their service offerings in handling connecting passengers. The second is the improved service quality that results from more integrated scheduling, a perceived increase in flight frequency, and potentially improved configuration of on-the-ground operations to provide smoother service to interlining passengers.
A third factor is the cost(in terms of higher fares and reduced quality or choice) of anticompetitive effects related to alliance expansion, such as the diminution , of competition on overlapping routes and the potential foreclosing of rival access to alliance members' networks. A fourth is any cost associated with alliance members' incentives to retard the development of competing alliances. These costs are separate and apart from higher prorate charges or access impediments that alliance members may place on rival carriers.
Finally, there is the potential cost of mutual forbearance in the form of implicit coordination between immunized alliances to refrain from entering further into each other's city-pair markets or aggressively expanding output in existing overlap markets. This is of particular concern in light of a trend toward expansion of alliances and alliance consolidation.