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

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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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File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/dobson_piga_mergers_LCA.pdf
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Bibliographic 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/sbe/research/economics/index.html
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Keywords: merger policy; Business model; Low-cost airline; Price discrimination; Yield management .;

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References

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Cited by:
  1. 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.
  2. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
  3. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Environmental and Business Economics.
  4. Budzinski, Oliver, 2012. "Empirische Ex-Post Evaluation von wettbewerbspolitischen Entscheidungen: Methodische Anmerkungen," Ilmenau Economics Discussion Papers 69, Ilmenau University of Technology, Institute of Economics.

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