Airline industry , merger , market power , efficiencies , entry-inducing effects
Abstract:
We investigate the competitive effects of the merger between Delta Air Lines and Northwest
Airlines (2009) in the domestic U.S. airline industry. Applying fixed effects regression
models we find that the transaction led to short term price increases of about 11 percent on
overlapping routes and about 10 percent on routes which experienced a merger-induced
switch of the operating carrier. Over a longer period, however, our analysis reveals that both
merger efficiencies and post-merger entry by competitors initiated a downward trend in prices
leaving consumers with a small net price increase of about 3 percent on the affected routes.
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