The Price Effects of Mergers in Airline Networks



The Price Effects of Mergers in Airline Networks

Authors

Kai Hueschelrath, ZEW Centre For European Economic Research

Description

We study the price effects of mergers in airline networks.

Abstract

We study the price effects of mergers in airline networks. Guided by a review of the existing theoretical and empirical literature, we develop two classifications of routes possibly affected by an airline merger. Subsequently, we apply a difference-in-differences approach to exemplarily investigate the price effects of the America West Airlines - US Airways merger completed in 2005. We find that although average prices increased substantially on routes in which both airlines competed either on a non-stop or one-stop basis prior to the merger, substantial average price reductions observed for routes without any pre-merger overlap suggest that the merger led to a net increase in consumer welfare.

Publisher

Association for European Transport