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Title:

Impacts of Airline Mergers on Passenger Welfare
Cover of Impacts of Airline Mergers on Passenger Welfare

Accession Number:

01622483

Record Type:

Component

Abstract:

Over the last decade, US domestic airline industry has undergone a series of consolidations. The authors provide a comprehensive assessment of the overall effects of each of the five major recent mergers on passenger welfare as evaluated through consumer surplus changes. The authors develop discrete choice models with fare, nonstop and one-stop service frequency, travel time, and other carrier and route attributes as parameters. The consumer surplus, as a function of these parameters, is calculated for each market as the measure of passengers’ welfare. By using the markets not affected by the mergers as a control group, the authors are able to separate out the welfare effects of mergers from those of other extrinsic factors such as oil price changes, changes in economic conditions, etc. Several new insights are obtained. The authors find that mergers of legacy network carriers with a significant proportion of overlapping markets are generally accompanied by flight reallocation and network reorganization, which in turn, contribute to an increase in passenger welfare. However, overall passenger welfare for very small communities declined after the mergers. Also, overall passenger welfare in markets with many competitors declined, consistent with the classic economic theory of consolidation-induced welfare losses. The authors also find that the welfare gain from mergers of legacy network carriers with significant proportion of overlapping markets progressively decreased as the number of existing major domestic carriers decreased, and that after the most recent mergers, any further potential mergers of legacy network carriers are likely to result in welfare losses.

Supplemental Notes:

This paper was sponsored by TRB committee AV040 Standing Committee on Aviation Economics and Forecasting.

Monograph Accession #:

01618707

Report/Paper Numbers:

17-02468

Language:

English

Corporate Authors:

Transportation Research Board

500 Fifth Street, NW
Washington, DC 20001 United States

Authors:

Luo, Tian
Vaze, Vikrant

Pagination:

16p

Publication Date:

2017

Conference:

Transportation Research Board 96th Annual Meeting

Location: Washington DC, United States
Date: 2017-1-8 to 2017-1-12
Sponsors: Transportation Research Board

Media Type:

Digital/other

Features:

References; Tables

Geographic Terms:

United States

Subject Areas:

Aviation; Economics; Passenger Transportation; Society

Source Data:

Transportation Research Board Annual Meeting 2017 Paper #17-02468

Files:

PRP, TRIS, TRB, ATRI

Created Date:

Dec 8 2016 10:55AM