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Cost structure effects of horizontal airline mergers and acquisitions.


ABSTRACT: The purpose of this research is to test the ex-post cost structure effects in horizontal mergers and acquisitions (M&A). Our proposed methodology quantifies cost structure effects empirically to inform competition policy around M&As in the airline industry. The results show that horizontal M&As involving unprofitable firms significantly reduce variable costs and increase fixed costs ex-post. M&As involving only profitable firms show no significant impact on the cost structure. We offer support that the ex-post cost structure effects of airline M&As depend on the incentives to improve efficiency, reflected in the ex-ante performance of the merging firms. We further argue that market behavior may not just depend on market structure but cost structures too, all of which should be accounted for in antitrust decision making and regulation around airline M&As.

SUBMITTER: Gudmundsson SV 

PROVIDER: S-EPMC7449883 | biostudies-literature | 2020 Dec

REPOSITORIES: biostudies-literature

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Cost structure effects of horizontal airline mergers and acquisitions.

Gudmundsson Sveinn Vidar SV   Merkert Rico R   Redondi Renato R  

Transport policy 20200827


The purpose of this research is to test the ex-post cost structure effects in horizontal mergers and acquisitions (M&A). Our proposed methodology quantifies cost structure effects empirically to inform competition policy around M&As in the airline industry. The results show that horizontal M&As involving unprofitable firms significantly reduce variable costs and increase fixed costs ex-post. M&As involving only profitable firms show no significant impact on the cost structure. We offer support t  ...[more]

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