European Airline Mergers, Alliance Consolidation and Consumer Welfare

40 Pages Posted: 7 Apr 2004

See all articles by Jan K. Brueckner

Jan K. Brueckner

University of California, Irvine - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Eric A. J. H. Pels

Vrije Universiteit - Department of Spatial Economic

Date Written: March 2004

Abstract

This paper explores the effects of a European airline merger followed by a consolidation of two competing international alliances. The exercise has been inspired by the Air France-KLM merger, which is expected to spur consolidation of the Northwest-KLM and SkyTeam alliances into a single mega-alliance. The results of the analysis show that, although the airlines benefit through higher profits, the merger and alliance consolidation harm consumers while reducing overall social surplus. The reason for this negative outcome is that, as modeled, all the effects of the merger and alliance consolidation are anticompetitive.

JEL Classification: L4, L9

Suggested Citation

Brueckner, Jan K. and Pels, Eric A.J.H., European Airline Mergers, Alliance Consolidation and Consumer Welfare (March 2004). Available at SSRN: https://ssrn.com/abstract=526142 or http://dx.doi.org/10.2139/ssrn.526142

Jan K. Brueckner (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Eric A.J.H. Pels

Vrije Universiteit - Department of Spatial Economic ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31-20-4446049 (Phone)
+31-20-4446004 (Fax)

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
755
Abstract Views
3,566
rank
46,247
PlumX Metrics