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Mergers and Business Model Assimilation: Evidence from Low-Cost Airlines Takeovers

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Author Info
Paul W. Dobson () (Business School, Loughborough University.)
Claudio A. Piga () (Department of Economics, Loughborough University)

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Abstract

This paper examines mergers that lead to an almost immediate replacement of the target firm’s business model in favor of that of the acquiring firm. We examine the post-merger behavior of the two leading European dedicated low-cost airlines, EasyJet and Ryanair, each acquiring another low-cost airline, respectively Go Fly and Buzz. We find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of inter-temporal price schedules used on the acquired routes, with early booking fares noticeably reduced and only very late booking fares increased. The analysis suggests that the takeovers had a net beneficial effect as a consequence of the introduction of the acquiring firms’ business models and associated yield management pricing systems. .

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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2009_2.

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Date of creation: Feb 2009
Date of revision: Feb 2009
Handle: RePEc:lbo:lbowps:2009_2

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Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page: http://www.lboro.ac.uk/departments/ec/Research.htm
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For technical questions regarding this item, or to correct its listing, contact: (Dr. Claudio Piga).

Related research
Keywords: merger policy; Business model; Low-cost airline; Price discrimination; Yield management .;

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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    Other versions:
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    Other versions:
  10. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June. [Downloadable!] (restricted)
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    Other versions:
  12. Richard, Oliver, 2003. "Flight frequency and mergers in airline markets," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 907-922, June. [Downloadable!] (restricted)
  13. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter. [Downloadable!] (restricted)
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