Are Legacy Airline Mergers Pro- or Anti-Competitive? Evidence from Recent US Airline Mergers

Posted by Social Science Research Network

Are Legacy Airline Mergers Pro- or Anti-Competitive? Evidence from Recent US Airline Mergers

Dennis W. Carlton (University of Chicago), Mark A. Israel, Ian MacSwain & Eugene Orlov (Compass Lexicon)

Abstract:     Due to a series of recent mergers, the number of legacy airlines in the United States has decreased from six to three. We conduct a comprehensive investigation of the effect on fares and output of these legacy airline mergers to determine whether the mergers have had an overall pro-competitive or anti-competitive effect on consumers. Our difference-in-differences regression analysis shows that, considered together or individually, these mergers have been pro-competitive, with no significant adverse effect on nominal fares and with significant increases in passenger traffic as well as capacity. Taken together and in sharp contrast to recent contrary claims, the results indicate that the recent legacy mergers were pro-competitive.

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