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This paper analyzes the impact of airline agreements on systemic risk to empirically test the stability and fragility hypotheses against one another. I apply network theory to make the notion of connectedness within the industry more concrete through the use of centrality and density measures and use marginal expected shortfall to capture the extent to which links between airlines effect their exposure to systemic risk. This investigation effectively takes systemic risk outside of its traditional banking sector context and examines it within the airline industry. At first glance, I find strong evidence in favor of the stability hypothesis, but upon closer inspection, it becomes clear that the relationship between an airline’s position in the industry, as informed by its agreement structure, and systemic risk is conditional on the state of the industry in a given time period.
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