Abstract: An airline alliance network consisting of two risk-averse airlines is addressed in this paper. A decisionmaking model for such a network is proposed. By using the meanstandard deviation risk measure criteria, a decision-making objective function for the airline alliance members is also established. First, an equilibrium model in the network is analyzed under the centralized decision-making. It is found that the risk aversion characteristics of airlines reduce ticket prices of airlines, thereby reducing the overall effectiveness of the airline alliances. Second, under the revenue sharing mechanism, a decentralized decision-making model in the airline alliance network is investigated. Result shows that revenue sharing mechanism can maximize not only the effectiveness of the individual alliance members, but also maximize the overall effectiveness of airline alliances. The revenue sharing mechanism can improve the performance of airline alliance members, which is closely related to the price elasticity coefficient, the ratio of operating costs in the domestic and international routes, the airline’s risk aversion and the revenue sharing coefficient. In addition, numerical results determine that the effects of different parameters on the performance levels of the airline alliance members are different under the revenue sharing mechanisms.

Key words: airline alliances, revenue sharing, risk averse