ADVERSE EFFECTS OF MERGERS ON AIRLINE PERFORMANCE: THE CASE OF CANADIAN AIRLINES INTERNATIONAL, LTD

Supporters of airline mergers generally argue that mergers will strengthen the surviving airlines by decreasing expenses and/or by increasing market shares. However, the reality does not always conform to expectations. Because mergers have a long history in Canada and the U.S., it is possible to investigate their effects. The merger involving Canadian Airlines International, Ltd. (CAIL), which involved the merging of 4 smaller airlines between 1986 and 1990, provides a good case study for the analysis of the effects of mergers on airline performance. In this paper, the performance of CAIL during and following this series of mergers is studied to provide evidence of whether mergers are beneficial or detrimental to the surviving airlines.