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An Empirical Analysis of a Merger Between a Network and Low-cost Airlines

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  • Xavier Fageda
  • Jordi Perdiguero

Abstract

We use a difference-in-difference estimator to examine the effects of a merger between three airline companies on two types of route: (1) on those where two low-cost carriers and (2) on those where a network carrier and one of the low-cost airlines had previously been competing. We report a reduction in flight frequencies but find no substantial effect on prices in the first case, while in the second we report an increase in prices but no substantial effect on frequencies. The results would seem to be attributable to the differences in the types of passenger flying these routes. © 2014 LSE and the University of Bath

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  • Xavier Fageda & Jordi Perdiguero, 2014. "An Empirical Analysis of a Merger Between a Network and Low-cost Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 81-96, January.
    • Handle: RePEc:tpe:jtecpo:v:48:y:2014:i:1:p:81-96
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    1. Juan Luís Jiménez & Jordi Perdiguero, 2009. "(No)competition in the Spanish retailing gasoline market: a variance filter approach," Working Papers XREAP2009-05, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2009.
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    3. Xavier Fageda & Jordi Perdiguero, 2014. "An Empirical Analysis of a Merger Between a Network and Low-cost Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 81-96, January.
    4. Fageda, Xavier, 1975- & Flores-Fillol, Ricardo, 2010. "Technology, business models and network structure in the airline industry," Working Papers 2072/151552, Universitat Rovira i Virgili, Department of Economics.
    5. Agustí Segarra-Blasco, 2007. "Innovation, R&D Spillovers and Productivity: The Role of Knowledge-Intensive Services," Working Papers XREAP2007-12, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2007.
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    7. Abel Lucena, 2009. "The antecedents and innovation consequences of organizational search: empirical evidence for Spain," Working Papers XREAP2009-08, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2009.
    8. Germà Bel & Xavier Fageda, 2008. "Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis," Working Papers XREAP2008-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2008.
    9. Daniel Albalate & Germà Bel & Xavier Fageda, 2010. "Is it Redistribution or Centralization? On the Determinants of Government Investment in Infrastructure," Working Papers XREAP2010-15, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2010.
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    Cited by:

    1. Mizutani, Jun & Sakai, Hiroki, 2021. "Which is a stronger competitor, High Speed Rail, or Low Cost Carrier, to Full Service Carrier? – Effects of HSR network extension and LCC entry on FSC's airfare in Japan," Journal of Air Transport Management, Elsevier, vol. 90(C).
    2. Fageda, Xavier & Flores-Fillol, Ricardo & Theilen, Bernd, 2019. "Hybrid cooperation agreements in networks: The case of the airline industry," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 194-227.
    3. 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.
    4. Rafael Rocha Oliveira & Claudio Lucinda, 2024. "How do incumbents react to the exit of a potential competitor? Evidence from the airline sector," Working Papers, Department of Economics 2024_04, University of São Paulo (FEA-USP).
    5. Steven, Adams B. & Yazdi, Amirhossein Alamdar & Dresner, Martin, 2016. "Mergers and service quality in the airline industry: A silver lining for air travelers?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 1-13.
    6. Joan-Ramon Borrell & Juan Luis Jiménez & Carmen García, 2014. "Evaluating Antitrust Leniency Programs," Journal of Competition Law and Economics, Oxford University Press, vol. 10(1), pages 107-136.
    7. Raúl Ramos & Esteban Sanromá & Hipólito Simón, 2014. "Public-Private Sector Wage Differentials by Type of Contract: Evidence from Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 208(1), pages 107-141, March.
    8. Antoni Ferri & Montserrat Guillén & Lluís Bermúdez, 2012. "Solvency Capital estimation and Risk Measures," Working Papers XREAP2012-02, Xarxa de Referència en Economia Aplicada (XREAP), revised Jan 2012.
    9. Campos, Javier & Jiménez, Juan Luis & Perdiguero, Jordi, 2015. "Contestability and public concern about airfares: A case study in the Canary Islands," Transport Policy, Elsevier, vol. 42(C), pages 180-186.
    10. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2013. "Airline consolidation and the distribution of traffic between primary and secondary hubs," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 951-963.
    11. Ma, Wenliang & Wang, Qiang & Yang, Hangjun & Zhang, Anming & Zhang, Yahua, 2019. "Effects of Beijing-Shanghai high-speed rail on air travel: Passenger types, airline groups and tacit collusion," Research in Transportation Economics, Elsevier, vol. 74(C), pages 64-76.
    12. Xavier Fageda & Jordi Perdiguero, 2014. "An Empirical Analysis of a Merger Between a Network and Low-cost Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 81-96, January.
    13. Li, Lu & Wan, Yulai & Yang, Dong, 2024. "Do shipping alliances affect freight rates? Evidence from global satellite ship data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 181(C).
    14. Lenartowicz, M. & Mason, K. & Foster, A., 2013. "Mergers and acquisitions in the EU low cost carrier market. A Product and Organisation Architecture (POA) approach to identify potential merger partners," Journal of Air Transport Management, Elsevier, vol. 33(C), pages 3-11.
    15. de Oliveira, Renan P. & Oliveira, Alessandro V.M., 2021. "Financial distress, survival network design strategies, and airline pricing: An event study of a merger between a bankrupt FSC and an LCC in Brazil," Journal of Air Transport Management, Elsevier, vol. 92(C).
    16. Miranda, Victor A.P. & Oliveira, Alessandro V.M., 2018. "Airport slots and the internalization of congestion by airlines: An empirical model of integrated flight disruption management in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 201-219.
    17. 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).
    18. Antoni Ferri & Lluís Bermúdez & Montserrat Guillén, 2012. "How to use the standard model with own data?," Working Papers XREAP2012-03, Xarxa de Referència en Economia Aplicada (XREAP), revised Feb 2012.

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    More about this item

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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