HighlightsA framework for the assessment of the effects of airline mergers is developed.Consumer surplus, frequency and fare effects of five recent mergers are analyzed.Consumer surplus gains are found following the UA-CO and DL-NW mergers.Passengers in regions dominated by the larger merging carrier especially benefit.Highly competitive markets experience welfare losses following legacy mergers.
AbstractSince 2005, the US airline industry has undergone a series of consolidations. We provide a comprehensive assessment of the overall effects of five major recent mergers on passengers’ welfare. We compute consumer surplus changes using passenger discrete choice models based on the attributes of airlines and routes. We then evaluate these changes, as well as changes in frequency and fare, using a difference-in-differences approach. Our major findings include large consumer welfare gains following the DL-NW and UA-CO mergers, welfare gains in regions dominated by the larger carrier in the merger, and welfare losses in highly concentrated markets following legacy mergers.
Impacts of airline mergers on passenger welfare
2017-03-16
25 pages
Article (Journal)
Electronic Resource
English
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