The effects of mergers on airline performance and social welfare

Jia Yan, Xiaowen Fu, Tae Hoon Oum, Kun Wang

Research output: Chapter in book / Conference proceedingChapter in an edited book (as author)Academic researchpeer-review

3 Citations (Scopus)

Abstract

This chapter reviews the key results obtained in previous studies of airline mergers. It is found that the effect of mergers on airfares is dependent on the network configurations of merging airlines. Fare increases are frequently observed on overlapped routes. However, if the networks of two merging airlines are complementary, the expanded network after the merger leads to cost savings, increase in travel options, and improvement in service quality. Therefore, in a deregulated market, with few entry barriers, relaxing merger regulations is likely to improve welfare. However, most welfare evaluations do not incorporate quality changes or dynamic competition effects. Empirical investigations are primarily ex post analysis of mergers that have already passed antitrust reviews. The relationship between market concentration and welfare might be nonlinear and market specific. Therefore, airline mergers and alliances should be reviewed case by case. Methodological improvements are needed in future studies to control for the effects of complicating factors inherent in ex post evaluations.

Original languageEnglish
Title of host publicationAdvances in Airline Economics
PublisherEmerald Group Publishing Ltd.
Pages131-159
Number of pages29
DOIs
Publication statusPublished - 1 Jan 2016
Externally publishedYes

Publication series

NameAdvances in Airline Economics
Volume5
ISSN (Print)2212-1609

Keywords

  • Airline merger
  • Airline performance
  • Network effects

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Transportation
  • Pollution
  • Aerospace Engineering

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