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The Effects of Mergers on Airline Performance and Social Welfare

In: Airline Efficiency

Author

Listed:
  • Jia Yan
  • Xiaowen Fu
  • Tae Hoon Oum
  • Kun Wang

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.

Suggested Citation

  • Jia Yan & Xiaowen Fu & Tae Hoon Oum & Kun Wang, 2016. "The Effects of Mergers on Airline Performance and Social Welfare," Advances in Airline Economics, in: Airline Efficiency, volume 5, pages 131-159, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aiaezz:s2212-160920160000005006
    DOI: 10.1108/S2212-160920160000005006
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    Citations

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    Cited by:

    1. Doi, Naoshi & Ohashi, Hiroshi, 2019. "Market structure and product quality: A study of the 2002 Japanese airline merger," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 158-193.
    2. Yan, Jia & Fu, Xiaowen & Oum, Tae Hoon & Wang, Kun, 2019. "Airline horizontal mergers and productivity: Empirical evidence from a quasi-natural experiment in China," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 358-376.
    3. Ma, Wenliang & Wang, Qiang & Yang, Hangjun & Zhang, Yahua, 2020. "Evaluating the price effects of two airline mergers in China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).

    More about this item

    Keywords

    Airline merger; network effects; airline performance; L5; L9; R4;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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