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An empirical analysis of a merger between a network and low-cost airlines

Author

Listed:
  • Xavier Fageda

    () (Department of Economic Policy, Universitat de Barcelona. Research group “Governs i Mercats” (GiM).)

  • Jordi Perdiguero

    () (Department of Economic Policy, Universitat de Barcelona. Research group “Governs i Mercats” (GiM).)

Abstract

We use a difference-in-difference estimator to examine the effects of a merger involving three airlines. The novelty lies in the examination of this operation in two distinct scenarios: (1) on routes where two low-cost carriers and (2) on routes where a network and one of the low-cost airlines had previously been competing. We report a reduction in frequencies but no substantial effect on prices in the first scenario, while in the second we report an increase in prices but no substantial effect on frequencies. These results may be attributed to the differences in passenger types flying on these routes.

Suggested Citation

  • Xavier Fageda & Jordi Perdiguero, 2011. "An empirical analysis of a merger between a network and low-cost airlines," Working Papers XREAP2011-01, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
  • Handle: RePEc:xrp:wpaper:xreap2011-01
    as

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    File URL: http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-01.pdf
    File Function: First version, 2010
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    File URL: http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-01.pdf
    File Function: Revised version, 2011
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    References listed on IDEAS

    as
    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.
    2. 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.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Raúl Ramos & Esteban Sanromá & Hipólito Simón, 2014. "Public-Private Sector Wage Differentials by Type of Contract: Evidence from Spain," Hacienda Pública Española, IEF, vol. 208(1), pages 107-141, March.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    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.

    More about this item

    Keywords

    Mergers; Airline Market; Low-Cost Carriers; Difference-in-Difference;

    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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