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Airline mergers with low cost carriers

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  • Kawamori, Tomohiko
  • Lin, Ming Hsin

Abstract

A hub carrier operates one hub linking multiple non-hub cities. It merges with a low cost carrier whose nonstop service competes with its one-stop service. The merged airline's profit is maximized by withdrawing the competing one-stop (nonstop) service when the hub carrier's operating cost and connecting passengers' hub-through additional time costs are large (small). The realized merger is welfare-improving (welfare-decreasing) when these costs are large or small (intermediate). These findings suggest the necessity of merger regulation. In some regions, the necessity of regulation does not monotonically change as network size increases.

Suggested Citation

  • Kawamori, Tomohiko & Lin, Ming Hsin, 2013. "Airline mergers with low cost carriers," Economics of Transportation, Elsevier, vol. 2(2), pages 63-71.
  • Handle: RePEc:eee:ecotra:v:2:y:2013:i:2:p:63-71
    DOI: 10.1016/j.ecotra.2013.04.001
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    References listed on IDEAS

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    7. Fageda, Xavier & Flores-Fillol, Ricardo & Lin, Ming Hsin, 2020. "Vertical differentiation and airline alliances: The effect of antitrust immunity," Regional Science and Urban Economics, Elsevier, vol. 81(C).

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